Part 4: Repairing the Stuff You Can’t Live Without

Today we continue with the “6 Reasons We Spend Money” series, where we look at the common expense types we all run into.

If you missed the first three you can find them here:

  1. Weekly Living Expenses
  2. Predictable, Non-Weekly Repeating Expenses
  3. Product Purchases

Today we look at common expense type number four: Repairing the Items that Support your Life

No matter how lucky you are, sooner or later you will have to pay for repairs to something you rely on: white goods, motor vehicles, even your own body. I can't tell you how many people I have spoken to who believed the seemingly untimely need to repair something they rely on every day was an unfortunate unpredictable event. Everything breaks down sooner or later, so only a fool would neglect to put funds aside in anticipation of this. The important thing to remember is that there is often more than one way to solve a problem and the easiest solution is usually the most expensive one. Thinking outside the square may require more effort but often costs less money. Whichever solution you come up with, throwing money at a problem you have not planned for may appear to have solved it — it has just transferred it to a different place! For example, when your car breaks down you experience inconvenience and want that to go away. If you fix the problem by putting the repairs on your Credit Card, the inconvenience definitely goes away and life gets back to normal, but the problem has not gone away. It now needs to be repaid, possibly with added interest. If you solve a number of problems this way during a 12 month period and then do that for four of five years in a row you can end up in a lot of financial pain.

Don't Make This Common Mistake

When making a purchase decision, the clever person factors in the need to put money aside to cover repairs down the track. What usually happens is the opposite, though. Here's an example: You decide it's time to update the car. You consider a price bracket you can afford, but when you start looking you suddenly find compelling reasons to upgrade to a better model with shinier features. How do you afford this upgrade? By eating into your repair budget. Instead of leaving a safety margin for repairs, you're now in a precarious situation that could go horribly wrong if something breaks down ‘unexpectedly'. I'm sure you probably know someone who has done something like this!

How To Manage This Money?

You should put money aside each payday, and the amount you dedicate to your repair budget will be determined not just by what you can afford, but also by other factors such as the age, quality, price, and the number of items you are planning for. Once you build up a decent reserve you may even be able to back off and funnel funds to other more exciting projects.

Where Should You Keep This Money?

Where you decide to keep this money will depend on your situation and setup. Here are some ideas: You can never accurately guess how much you need for repairs for each item you rely on, so it makes sense to have a single ‘bucket' of money for general repairs. This money could be kept in your Bills Account as long as you have a Spending Plan that includes it so it doesn't get 'lost' among your other Bills money. If you don't have that kind of Spending Plan, it makes a lot of sense to keep this money separate so you know how much you have available at any point in time. You might be able to keep it in a mortgage offset account. Or, if you have a redraw facility on your mortgage you may be able to add your repair budget to your mortgage payments and draw it back when needed. (The problem with a redraw facility is that having it makes it much more likely that you will use it, and when you do use it, it's likely you will redraw not only you your savings money, but money you had paid off the principal of your loan as well!)

Success With Money

I keep harping on about this for a good reason. If you think success with money is for someone else, think again! You deserve it as much as anyone else does and I have helped thousands of people achieve it, so why not you? If you can take control of your spending by making some of the little changes above, you'll put some breathing space between you and your money stress, allowing you to relax and start building a stable financial future for your family.

How many expenses do you accept in your day without question, and where could you reduce your weekly outgoing money just by changing a few habits? If you just can't get your head around that and/or you are tired of money stress and have decided it's time to take control, talk to a Spending Planner to find out how you can break the cycle - BOOK A FREE CALL

You have nothing to lose and lots to gain. Spending Planners are non-judgmental professionals who are trained to help. A short relationship with a Spending Planner will provide you with tools and training that will benefit you for the rest of your life!            

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Creating your own personal Spending Plan will be one of the best things you ever did.

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