Everything you own will one day be junk

That’s right, everything you own will eventually be junk.  But then again, so will everything I own.  It’s the unfortunate cycle stuff that we life in these days.  Your car, your laptop, everything, will eventually break down.  So how can we protect ourselves from these events?  I mean, the girlfriend needs new brakes for instance.  What could / should we do to make sure we’ve got enough money in the bank for these things?

This thought has been rolling around in my head for a long time.  It goes hand in hand with my savings, cash flow, and investment goals.  Basically, we all want nice things.  But we hate spending money and we hate using our credit cards (or we’re at least supposed to….$30K Millionaire anyone?).  Even worse, we’re all pretty awful at planning.  Just because I’ve got a budget doesn’t mean I’m good at it!

So how the hell do we plan for these things?  A lot of the things that go wrong, laptop dying or your car breaking down, for example, tend to pop out of nowhere.  If we’re talking about the unexpected, then this is going to be a difficult thing to plan for.  If we’ve done things right then we’ve got our emergency savings ready to help us take care of any unforeseen event.  But at the same time, that’s for when we lose our job, not for buying a new laptop.

So, we need to figure out how much things cost.  Let’s use a laptop and a car as our two examples.  A low end macbook pro, non refurbished, can be purchased for $1,200.00.  A used diesel Jetta can be purchased for about $9,000.  Now let’s look into this a bit further: what are the useful life spans for each object.  While the macbook pro is great, we’d probably replace it after 3 years, because we’re kind of snobs.  For the used diesel Jetta, we’re looking at an additional 10 years.  They run forever and we’re talking about paying cash for them.  So three and ten years down the line, we need to make sure we’ve saved up the rough equivalent of today’s value, in order to just buy what we need and move on.  Assuming a 5% annual growth rate (we’re considering a Vanguard indexed fund or something like that for our savings), we really don’t need to save that much per month.  Only $40 per month for the laptop and about $100 a month for the car.  By identifying what we’ll need way down the line, we can save ourselves some heartbreak and set the money aside now and grow it over time.

Through some careful planning, we (mostly me) can figure out how to not bust our budgets and save for things we want, like cars, laptops, or suits.  If saving $40 a month for three years means I can get a sweet laptop (or three good suits) then I’d have to say that I prefer that to the alternative of just spending money I don’t have when I think I want something.