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Interesting Comment From A Reader Regarding Our Kitchen Remodel
By JLP | March 19, 2007
I just received the following comment from Rob on my Kitchen Remodel Follow-up post:
Waiting to pay only in cash seems like a noble approach, but on the other hand life is short and every year you wait is another year that you don’t get to enjoy your nice new kitchen. Life is short and you miss out on a lot by waiting until you have saved enough to pay for the whole thing in cash. I guess you can wait until you’re 90 and have saved up enough to buy everything you want, but then you will have a lot of really nice things and be too dead to enjoy them. I just think there has to be some balance and people always have to remember that they may be saving a few bucks but they are paying with time, which we never get back.
Rob is correct: we need to have balance. The question is, where do you draw the line? I mean, I’d like a new Infiniti FX45. I don’t have one because it doesn’t fit our budget. We can justify just about any purchase by saying, “Life is too short.”
I think my wife and I have reached a maturity point to where “things” just aren’t as important to us as they used to be. We make good money now and we know that eventually we will have everything we want. It just takes time.
I’m not against financing a portion of the kitchen. However, it is going to end up costing us at least TWICE what we had originally thought we would be comfortable with. And, with anything that is financed, the money used to pay back that purchase must come from somewhere. We have several other goals that we want to meet and those goals would have to be put off if we financed our kitchen.
For us, this was the right decision.
Now, I’m curious as to what you guys think. How do you balance your purchases with your other financial goals?
Topics: Budgeting | 18 Comments »
March 19th, 2007 at 1:09 pm
I understand where Rob is coming from. My first wife and I scrimped and saved and invested for a better future. Then she died from cancer, and didn’t get to enjoy the future. Since then I have tried to balance taking care of the future with taking care of here and now.
Having said all that, I think that you are doing the right thing waiting and saving for your kitchen. After all, it works. It just isn’t as pretty as it could be.
March 19th, 2007 at 1:26 pm
Gah. I keep asking myself about remodeling my kitchen and what I’m waiting for. Well I found out. The labor alone will cost about $3.5K and that’s if I buy the new cabinets and appliances myself. Sheesh. I just don’t know if that’s worth it for my rinky dinky studio.
March 19th, 2007 at 1:30 pm
Oh, to answer your question, I don’t know if I really make that balance. I think I blow off the stuff that isn’t pressing. The car is paid for and runs fine. The apartment needs work, but I can live with it as is. (Except the water damage I have, which is how I got the kitchen renovation estimate.) I guess I keep thinking to myself that any potential worldly purchases mean less to me than fully funding my 401k right now.
March 19th, 2007 at 2:09 pm
Jeffrey,
Patti is getting the name and Number of the person who does cabinet refacing. He is known to do excellent work for a fraction of the cost of new cabinets. I’ll pass that along when she gets it to me.
March 19th, 2007 at 2:20 pm
JLP, I couldn’t agree more! Life is not about ‘things’. If someone thinks it takes ‘things’ to enjoy life, they will always be chasing ‘things’ and never be happy. Don’t mis-understand me, I like things and you can / should have things… they just shouldn’t have you.
Keep saving up, that way once the remodel is done you can enjoy it without thinking about how you are paying for it every time you cook dinner!
Mapgirl – your’s seems more of a need rather than a want… still not a fan of debt though. Maybe you could attack it is phases?!?
March 19th, 2007 at 2:23 pm
This is a question I grapple with constantly. I’m fortunate to now be in a position in which I could probably “afford” just about anything (and with cash); I just can’t necessarily afford it all at the same time, hence the need to prioritize. I also like being able to sleep well at night knowing that I’m financially prepared for the worst – and that certainly places some limits on blowing $$$ on wants.
But, having hit 40, I am asking myself: Hey, I’m really not getting any younger and at some point I might not be physically able to enjoy certain things. For example, I love sailing and would love to own a sailboat. When I’m 65, I might not be in good enough shape to handle a sailboat (lots of climbing and twisting and wrenching, etc.). Should I spend $150,000 on a sailboat? Or at some point, I’m going too look pretty silly at age 70 driving a Porsche with the top down. Maybe I should get it now, while I can actually see where I’m going.
Anyhow, to answer your question, I prioritize according to the following (using the sailboat as an example):
1) Is the expenditure going to cause me to sleep less soundly? (No, A sailboat or car would not break the bank)
2) Do I have time for the activity or will it create complexity in my life that I do not need right now? (Yes and No, I do not have enough leisure time to make it worthwhile right now; I don’t want the burden of taking care of anything time-consuming)
3) Will it create ongoing expenditures? (absolutely, It would require lots of time and ongoing expenditures).
4) Is there a good reason to wait? (Yes, for when I downscale and have more time, but clearly I shouldn’t wait too long)
5) Is it really harming me by not waiting? (Sort of – I think it’d be a great way to relax, but might also create a lot of anxiety)
So, the answer on the sailboat is to wait – probably another 5-10 years.
But, gotta tell you, with our relatively new kitchen, I’m glad we did not wait. It is something we use every single day, the focal point of our home, and it was worth every penny!
March 19th, 2007 at 2:32 pm
I left out one other question on my list: Are there near-term business oppty’s I would like a have capital set aside for where an expensive purchase might limit my opportunity?
As you can see, I’m not so much of the frugality mindset – I think money is to be enjoyed, you work hard, you get to play hard – but I am of the everything in due time mindset. No matter how much money you might have, you still have to make choices (hopefully judicious choices) about how to allocate your financial resources.
March 19th, 2007 at 2:37 pm
With respect to paying cash later versus financing now, it’s all a matter of weighing the added benefits you’ll receive by getting something now versus the additional costs involved. One easy way to address this is to do the math and figure out how much more you’ll be paying by buying now and dividing by the number of months it will take you to save the cash. The result is how much you’ll be paying per month if you finance it between now and the time you’ll have the cash to buy it. This figure is a lot easier to evaluate.
March 19th, 2007 at 2:54 pm
It depends on a want versus a need. A need is something absolutely required and want is just that. For instance if your kitchen works, then you can wait. But if the fridge dies, dishwasher breaks, maybe it’s a sign to move it up from a want to a need.
Why? Because to me a good kitchen is worth the investment. We use ours daily, we eat in a lot because we like our kitchen. It’s not the perfect kitchen, but now we get a lot more use out of it when before it was too small to fit everything.
I weigh the cost of a purchase or how often I’ll use it. For example I want a new car, but I don’t need a new car.
I have water damage also in my kitchen, and it’s absolutely necessary to repair because to me proper maintenance of a home is essential to keeping it’s value. I do not try to cut corners and save money by being penny wise and pound foolish.
I maintain my cars religiously because I want it to last. Sure an extra $50 from skipping an oil change would be great, but is it worth the damage to the car? No. So I just try to keep going.
I also believe in buying better quality things that last longer instead of lots of cheap trinkets. So if I were doing a kitchen, I’d go for something that will last a long time, look good a long time, and makes me happy. Resale doesn’t matter because I will use a kitchen everyday, and it will bring me pleasure.
Waiting is fine, it’s just a personal decision and only you know what it looks and functions like.
March 19th, 2007 at 3:01 pm
I find it’s interesting to try to put this kind of thing into mathematical terms. I had a version this same argument with myself a couple of years ago when I was single. The basic debate was how “perfect” of a mate I could find vs. how long it would take to look. Would it be better to find somebody 95% perfect at age 25, or to find somebody 99% perfect at age 40? How long do you “keep looking” before you just decide to make do with what you’ve got and get on with enjoying life before it’s too late?
Now, obviously it’s impossible to put hard and solid numbers on such things as how perfect a potential mate is. But it’s actually easier to do with these financial decisions. Economists do it all the time…. they attempt to quantize happiness. On a scale of 0 to 100, how happy would you be if…? Would you prefer A to B? If so, then A provides more happiness than B, so try to take a bunch of options and order them according to your preferences, and that’ll help us construct a model of your happiness within this particular domain.
Situation A: $50k renovation, now, $30k financed
Situation B: $20k renovation, now, $0 financed
Situation C: $50k renovation, 3 years from now, $0 financed
Situation D: etc. etc.
In my own opinion, for such a big expense, it is worth it to finance as long as you have a plan for paying it off within a couple of years. You have to consider the value of having something NOW vs. 3 years from now. For all of the following discussion, I’m still assuming a $50k renovation 3 years from now (but, realistically, by that time it could actually cost $55k or more).
Let’s look at Situations A and C, for example. If you go with A, you’ll have $30k financed, let’s say you pay it off in 3 years at 10% interest. The payments will be $968 for 36 months. You will end up paying about $5,000 in interest.
So that $5k is the most simplistic cost difference between A and C. Under C, you still will have to “make payments” of $718 a month to your kitchen fund for 3 years (assuming you earn 10% interest on savings). So that’s $250 a month difference in payments. $250 * 36 = $9k extra that you’ll pay (the difference between the 10% interest that you pay vs. the 10% interest that you earn). Keep in mind that I’m still assuming $50k in renovations 3 years from now, but prices will presumably rise, so this isn’t entirely realistic. Inflation would reduce the difference between the two scenarios (inflation always favors the borrower).
So, let’s look at that (worst-case scenario) $9,000 extra that you would pay under Plan A. That is $9,000 for 3 years’ use of your kitchen, or $3k per year. How long were you planning on using it before you die, move to a new house, or remodel the kitchen again? Taking this $3k a year as a standard cost per year of enjoyment, you would need to enjoy the kitchen for exactly 16.7 years (50 divided by 3) to get that same average amount of enjoyment out of it. If you will enjoy the kitchen more than 16.7 years, it might make more sense to wait until you can pay cash for it. If not, your average cost per year of enjoyment will rise beyond $3k, so it makes sense to borrow the money now.
This is just a simplistic view of it, but I think it is already pretty illuminating. You may want to plug in your own numbers and look at it more thoroughly. I know you weren’t looking at 3 years, and also I’m not entirely sure what’s an accurate figure for the cost estimate.
March 19th, 2007 at 3:46 pm
For certain items, I don’t think it’s so much about having “things” as it is the atmosphere of your environment. If something creates an atmosphere that is nurturing to something such as sleep, relaxation, or even creativity and productivity if you work at home, then the concept of cost gets a little more complicated. For instance, I don’t mind spending good money on things like good pillows (or other sleeping related items), houseplants, quality eyeglasses, etc…
March 19th, 2007 at 4:18 pm
LivingAlmostLarge reminded me of yet one more question I ask myself in the decision process: Will the expenditure result in an opportunity of lasting value? For example, I see no need to defer the purchase of antiques – they generally become more rare and go up in value over time, so why wait.
In the case of our kitchen, we built it almost exactly as we dreamed of it within practical constraints – it should last many years (hopefully decades), it greatly enhances the value of the home, and it makes the home far more functional. So, this was a why wait, why skimp kind of question.
March 19th, 2007 at 4:36 pm
I’m personally waiting until I’m about 86% dead. Is that “too dead” to enjoy the things I want? Maybe I should aim for 57% dead…
March 19th, 2007 at 7:42 pm
Well — I’m going to weigh in on the side that you’ve made absolutely the best decision. The thing is, I think that JLP and Mrs JLP have the “how to save big” routine down pat and they’ll be able to sock the money away that they need for this cosmetic update to the house relatively quickly.
JLP — it’s like Dave Ramsey always says — “We’re going to live like no one else so that tomorrow we can live LIKE NO ONE ELSE.” The meaning I see in this is that if you defer this purchase until you can pay cash, you’re only increasing your financial stability both now and later. Now, because if you really needed to use that money for an emergency you’d have it. Later, because when you enjoy your new kitchen the food will taste SO MUCH BETTER because it’s already paid for.
I’d love for you to have a new kitchen, but I also think that whether you have a new kitchen or not is incidental. What is really important are the people in your life and how rich a quality of life, not whether you have granite countertops. You are living a truly free way when you opt to let your granite countertops wait — you are also doing something that this society has decided is worthless, deferring pleasure until you can truly afford it! I am not surprised at some of the responses you’ve gotten. However, you know as well as I do that you do not really find quality of life in your countertops, range etc. — they are just icing on an already satisfying cake.
JLP, don’t sweat it and don’t worry about waiting until the finances are right. There is so much more to life than a pretty kitchen.
db
http://www.debtblitzkrieg.com
March 20th, 2007 at 6:42 am
Really, it’s wants vs. needs.
Do you need it? Not really, but you’d like to have it, otherwise you wouldn’t be saving.
You’ve got your plan – some people prefer that it’s best to have it all right now, and that may be fine for them, but some people prefer to have it at the right time, which is what you’re doing.
Some people just don’t want to wait to “feel good” about their purchase.
March 20th, 2007 at 7:56 am
Seems like a matter of priorities. I saved a lot for the future and my ex-wife took half of it when we divorced after 24 years. Death can be unexpected. You certainly have to balance out what you will be able to do when you are old – I love mountain biking but I’m already 54 – how much will I really do if I wait 10 years to buy the perfect bike?
I just bought a HDTV last night – I figure that I won’t ever see a Buffalo Sabres hockey team as good as the one we have right now. Is it a smart money move? No way, but I can rationalize away just about anything if I try
March 21st, 2007 at 8:42 pm
LOL Paul. But seriously I like kitchens. If it were me I’d be tempted to toss it on a 0% CC and roll it a bit. Or use some savings.
March 23rd, 2007 at 6:56 am
They have us trained. Want something? Charge it. Don’t wait, don’t be patient, don’t save..finance it! Priceless. Don’t fool yourself with all the BS financial analysis. You have the WANTS. It’s okay, we all get them. Be patient, plan and save.