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  • Dave Kinzer

Why You Should Make A Home Inventory

If you have been reading my blog for awhile, then you know I’m a big believer in emergency funds and saving ahead of time for expenses you know you’ll have. The main reason for this is you simply never know when something is going to break and you have to repair or replace it immediately.

My wife has a 2004 Honda, and I have a 2005 Toyota. Since they are both getting up there in years, I got a little nervous when I realized that both cars might need to be replaced at the same time. Coming up with the cash to buy two vehicles at once would not an easy thing to do.

And this got me thinking about other things we own around the house that would eventually need to be replaced as well. I started to have nightmares in which not only our cars, but the oven, the furnace, and the roof all wear out and need to be replaced at the same time.

If you own your home, you could be in the same boat. So that you can plan ahead, I recommend you take a walk around your house and list every important item and appliance that would eventually need to be replaced. It’s only necessary to include big ticket items, like your furnace, refrigerator, water heater, and cell phone.

You should be able to cover the replacement cost of cheaper items that wear out, like shoes, toasters, and modems, by sticking to a budget.

For each item, first write down the year it was purchased or installed.

If you’re not sure how old an item is, make your best guess. Sometimes the year it was manufactured will be noted on the back or bottom of the item close to the serial number.

Then write down the year you might reasonably expect the item to need to be replaced. You might have to do some Googling here. Be sure to consult several sites and don’t just take the first answer you see.

For example, when I Googled, “How long do dishwashers last?”, I got several different answers. One website said they’ll usually last 6-10 years, while another said 9-16 years. Look at several different sources and pick a number somewhere in the middle.

Finally, do a little research and estimate the replacement cost for each item. Of course, you won’t know how much a washing machine or furnace will cost in eight years, but that’s okay. You’re just estimating here. Google it, and take the average of the prices you are seeing. If you really want to go the extra mile, add 5% or so to account for inflation.

After your Home Inventory list is complete, look at each replacement cost. If you are a homeowner, the total cost to replace everything is likely going to be in the tens of thousands of dollars if you include your roof in the list (and you should). The odds that you would ever need to replace even half of the items at the same time is near zero, but still, this is why everyone needs an emergency fund.

Then scan the column that has the year you estimate everything will need to be replaced. If a lot of items will need to be replaced in a two or three year period, you’ve got to start preparing now.

For example, let’s say you estimate that your car, water heater, and washing machine will all need to be replaced sometime close to 2026. You figure you’ll spend around $1,000 for the water heater, $600 for the washing machine, and $25,000 for the car.

The bad news is that if your estimation is correct, you’ll need to come up with $26,600 in several years if you don’t want to go into debt. The good news is you have approximately five or six years to plan for it.

Can you set aside over $26,000 in five years? If so, terrific! You’ll be able to replace those items without having to borrow money. If you can’t, start saving now anyway.

To buy the washing machine and water heater for $1,600 in five years, you’d need to save $26.66 each month. That should be doable. To pay for a $25,000 car with cash in five years, you’d need to save $416. That may be much more of a challenge.

If you can’t save the full amount, save what you can. Then when it’s time to buy a new car, maybe you can put down a large down payment instead of the minimum. This will save you loads of money in interest charges over time.

If you want to save money, as well as lower your stress level when something finally does break, be sure to establish an emergency fund and save and plan ahead for major purchases.

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