Most people don’t really budget for things that are large on a yearly or even monthly scale, but you can and probably should.
For example, I know that I use my headphones a lot and being without them would be really annoying. Budgeting based on buying them asap because I need them is a really painful way of managing that cost because I can’t do anything else at the same time and it is expensive. If instead I set aside a smaller amount while I still have working headphones it is much easier.
My formula for working out the cost is fairly simple. How much does it cost for an item to fill the need? How long do I expect that item to last in the worst case? How much would I therefore need to save per week for that cost to be saved before the current item needs replacement.
My headphones cost around $100. I expect to need replacement not sooner than about 16 months. So I should save $75 per year which works out to less than $2 per week. If I just save $2 per week I will hit my goal of $100 within the year and of something goes wrong earlier I can make the difference up the normal way. If I end up not needing a replacement by the time I hit my goal I can keep saving for a higher cost option or move that saving to another goal to boost that.
This post makes me really sad that so many people have to adapt strategies like this because they live paycheck to paycheck and cant even afford to replace headphones when they break unexpectedly.
Even if you have savings its useful to do this sort of thing. It helps get a better idea of how much you can spend on these big thigs and still save money at the rate you want.
How long do I expect that item to last in the worst case?
Worst case: Not even to the end of the day. Not a good metric.
In any case, do you actually keep track of everything you own like that? So x for headphones, x for the smartphone, x for shoes, x for tissues, …?
For some items yes, but, and perhaps this is privilege from living in Australia, surely if it fails immediately you can return it and get a replacement or refund? Here we have a 12 month warranty on most things but also a reasonae expectation standard, so if it is a larger thing like a fridge or dishwasher we can get more of a reasonable warranty period.
So I guess a better way of phrasing it would include at what point it requires more money from you if it fails? So for a basic electronic thing 12 months would be the minimum that would be covered by the manufacturer and you are only on the hook for it after that time? I know that is not suitable for some other places like the USA where you are often on your own once you leave the store.
But things don’t just fail because of manufacturing defects. You can lose things, drop them, rip the cable out while moving a chair, … so many ways to break on day one that are not covered. But okay, I understand that you expect things to last at least a year, that is a reasonable minimum.
Yeah, I have dyspraxia which is basically medically diagnosed lack of coordination. I drop my phone at least a few times a day, I bang into walls and benches all the time, and I’ve fallen over so many times I don’t even get hurt any more. Along with the coordination I have lost or broken so many things in just this way, not to mention I am massive and most things are not built for giants. So yeah, a good number of items have been broken or outright destroyed shortly after purchase. No budget can handle that other than to just have more money on hand and to be as careful as possible. Screen protectors, rugged cases, and no open top drink vessels.
Nah, you need different variables for every item. Headphones dont cost the same as tissues.
So x for shoes, y for tissues, z for headphones.
Not sure if this is serious or a joke.
Kind of both? Its technically true but I wasnt being serious about correcting you^^
What I guess I don’t get with this advice is, if you have the ability to save $X per week, why do you need to know about your headphones, why don’t you just save $X a week?
I understand that people seem to generally use up their expendable income immediately, but for me, I simply saved whenever I didn’t need to buy something. So in the background, without even thinking about it, money just accumulates. And then, when my headphones break, I just use some of that money that accumulated for headphones.
That obviously only works if you have expendable income. But that’s what the original advice requires anyway, it requires this ability of $2 savings per week, so the expendable income is already obviously there.
I just feel like it’s so much work to do this for every single thing, when instead you could just simply save whatever is “over” your survival needs, and then draw from that fund whenever necessary without thinking about each item individually.
It helps decide how much to actually save, and how much you can spend immediatly.
Yes this post seems to come from a place where savings arent a thing or at least unusual.
I come from a poor background, so having any large pot of cash was always risky due to “emergencies” requiring those funds. I got out of that living situation and now finally have more money than my living expenses for the first time. None of my family were actually good with money, so that is the background for this post. So yes, correct.
Thought so. Didnt want to sound judgy or anything, many people arent lucky enough to “learn about money” growing up and it sucks. Good for you to be able to afford more than you need for survival now. Dedicated cash pools for your goals or eventual replacements are a good step forward especially for people who arent used to having “spare money” and tend to spend it immediately.
Yeah, lots of people from my background are sensitive about it but honestly, nobody around me understood money and therefore couldn’t have taught me. I knew very little about money until later in my adulthood and at that point I didn’t have more than I needed. Now I have a little bit of excess and managing that has been a great learning experience.
This. Budgeting is a nebulous topic which means a lot of different things in different contexts.
For a household, if you don’t have any surplus then skip “budgeting” and go straight to minimising costs and increasing income where possible. If you do have surplus then, well… save it for something.
Im not great with budgeting but this is what I do. I just keep a pool of money for ‘whatever’ purchases.
It is a good teaching tool for budgeting though, especially with kids or people who never have budgeted (which is most people I’ve worked with, sadly).
I didn’t budget for much of my adult life because I had barely enough money to get by. That changed,.and I had to learn how to budget because I knew I would still be living hand to mouth if I didn’t. No matter how much I made.
I break my savings down into broad categories. It helps keep me honest. I can’t imagine the overhead of budgeting for every single item I might need to replace someday.
This is my thinking too. I had a housemate who earned the same as me and paid the same rent, and yet every month he managed to spend all his money while I saved a good chunk. Our pay was okay - not loads, but we lived in an area with a relatively low cost of living so the money went much further than it would elsewhere, so at least saving up a safety net should’ve easily been doable. I suppose it didn’t help that he took every opportunity to go on holiday half way around the world… I don’t think I’m miserly, I just don’t buy random stuff I don’t need. I also refuse to use Amazon, which probably makes things easier.
okay, but what if you die in an accident and didn’t use up your money you worked hard for. would be a real shame. the thought alone makes me want to be immortal
It wouldn’t be a shame, I’d be dead. I can’t worry or be upset about anything then. I get your point though - no point saving up money just for the sake of it. I’d like to buy a house eventually so that’s something meaningful to work towards, but I don’t think I would have any regrets about not accumulating random stuff if I died tomorrow.
well, it doesn’t have to be random physical things, but could be tickets for events, gambling, etc. i like to gamble a bit on the stock markets, for example. it’s like horse racing, but you can decide where the finishing line is.
Another thing to consider is quality. I’ve had a pair of Bose over ear headphones for 9 years that I bought on sale for about 200$. I treat them like crap and they keep on kicking. I’ve replaced the ear pads twice for 20$. Sometimes quality is worth factoring in too.
Absolutely. I had some TWS headphones that were really good and I actually ended up replacing the battery in the case when it couldn’t hold a day of charge because it was worth it. I would much rather repair something than replace it and buy quality that will last as well, both of which are benefited by having the cash on hand. If you can’t afford $200 headphones but you can get $20 ones today maybe buy the $20 ones and use them while saving for the better ones. It will take time but you may be able to make the crappy ones last long enough, even if you have to get two sets to make it through.
One downside i see with this is that it is often unclear how long an item will last. For example, I bought my dishwasher in 2021. When will they need to be replaced? The last one lasted 24 years, but I’m not going to bet on the new one lasting as long.
For that example, it should be in your home maintenance budget. That’s a major appliance. It’s going to fall into the same “major unexpected failure” category as anything else in your home.
Right. Basically, I can assume that at at least one thing in the household breaks each year. This year, it was the microwave oven.
Nice thing is that used microwaves are all over thrift stores for like $10 a pop. Our coffee maker broke this month and we got the best coffee maker we’ve ever had for $6.
Yes, and items seem to be manufactured to exceed their warranty period by only a short time. I assume that an item will last for a year in most cases, or the warranty period if that is longer. For white goods like a fridge or a washing machine I look for statistics and use longevity as part of my purchasing process, so I aim to buy appliances which will last a fairly long time and then save based on that not being the most likely outcome. My fridge can be expected to last 5-7 years, so by year 3 I will have enough saved or room made in lines of credit to afford a replacement. Obviously it is best to have nothing accruing interest so I will tend to pay credit down first but some if the credit cards where I am actually have good terms such as a 36 month interest free period. The utility of money during that time is available for other things and I can reduce my costs in other ways.
And most people making that advice don’t really understand that more and more people each year can’t even budget buying their own medication or even decent food to cook with.
It’s like the dog meme with “spend! No salary, just spend!” But with saving and investing.
But what about babies? They don’t even know what money is!
Few advices are universally applicable. Pick up what you need, leave the rest for others.
That’s a good idea! I do things differently (basically adding money to different “pools” to use for different categories), but if I need to forecast how much I’m going to spend on things, this would really help.
I tend to assume that something I buy will last forever (unless it’s explicitly replaceable)…but that’s basically never the case these days.
I do the pools idea too.
But every Christmas I sum my expected non regular expenses (maintenance fees, insurance, dentists, cloud storage, etc) and divide by 12 to get the monthly cost so I can spread out the expected budget busters.
Otherwise August/September give me a shock - lots of big bills then.
I have an Excel file for recurring expenses with dates of recurrence and auto-calculated yearly and monthly totals, and these factor into my monthly/yearly “budgets”. And thus, into how much I need to maintain my emergency fund!
