Last weekend, my DVD player died.
No big deal, right? We watch a lot of movies. We get a lot of enjoyment out of watching a lot of movies. Movies are fun for us. We’ve got a projector and a movie screen in our living room. Movies are our biggest pastime. Naturally, losing the movie machine hurts.
The thing that hurts the most is that this hasn’t been a good month for us, financially. My wife gets paid hourly, with semi-monthly paychecks. This means that, in a short month(like February!), her second paycheck is small by a few hundred dollars. When her company switched to that nonsensical plan, I watched for a few months, then set our budget to match the smallest paycheck she received. They haven’t been using this ridiculous plan for a full year, yet.
February caught me by surprise.
I know, it shouldn’t have. According to my research, there has been a February in every single year since well before I was born. I should have been expecting it. Oops.
So, to recap: our favorite pastime was dead and money was a little bit tight. There was no money to shake out of the budget to cover a new DVD player and there was no way we’d hit our emergency fund for something as frivolous—if enjoyable—as movies.
What to do?
About a year ago, I decided to start a warranty fund. There are things we can’t easily afford to replace, so we pay for warranties on some of them. For example, our cell phones have a repair plan, and that plan has saved us more than it has cost us. We have a repair plan for some of our appliances, and that, too, has saved more than it has cost us. My goal was to self-warranty my stuff. I wanted an account that had money that served no purpoase but to help me avoid paying for warranties.
I set up another ING Direct savings account and scheduled an automatic deposit. It’s only set to deposit $25 per month, but over a year, it was enough to replace our home theater system, with some left over. It is, quite simply, money to use when our stuff breaks.
With no warning, and no time to prepare, we still had enough money socked aside to handle one of life’s little surprises, without wrecking our plans.
How do you prepare to replace the things that are going to break?
We have an emergency fund which covers necessities that break. If it is a discretionary item that breaks than we save up for a new one.
I also keep a rainy day fund …. this is much better than actually buying a warranty, in my opinion. If I had a warranty for everything I own that could break (laptop, camera, iPod), the premiums would add up to replacing one of those each year or more … and, well, stuff just doesn’t break that often.
I think it makes sense to do this, and really it’s a matter of planning for the next purchase. For example, if you buy a car – even if you pay cash – it makes sense to save money each month, in a separate fund, for the next care. Then you can pay with less pain later. To a lesser degree, I think the concept holds with home electronics or similar purchases. Some of these funds could be used for repairing things that break early.
I tuck money away in so many different little accounts that I sometimes lose track. When I check back in a few months later, I’ve got far more than I remember depositing.