Beating Broke

Personal Finance from the Broke Perspective

Why We Don’t Plan to Renew Our Homeowners Warranty

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Our house came with a homeowners’ warranty.  The realtor we worked with, noting that our air conditioning unit was 18 years old, told us to make sure to keep up with the warranty because that would cover the cost of replacement on our central air unit.

At $650 a year, keeping up with the homeowners’ warranty to replace a $4,000 to $6,000 central air unit that was on its last legs sounded like a good deal.

Homeowners’ Warranties—Buyers Beware

Last year, one week into home ownership, our hot water heater died, and we got a glimpse of how the homeowners’ warranty worked.

Homeowners WarrantyI was not impressed.

We had to work with a specific company, I’ll call Company A, designated by the homeowners’ warranty, to replace the hot water heater.  Company A asked me to call my home owner’s insurance to see if they would pay to have a different company, Company B, come clean up the water damage.  (We had very little water damage, but Company A’s repair man assured me we’d get mold, even though we’re in Arizona with very little humidity.)  Luckily, I didn’t do that because Company B wanted to charge us $1,000 to clean up the water.

Clearly, Companies A and B must have had kickbacks with one another for business referrals.

Also, I thought we’d only have to pay the $75 service fee to get our hot water heater replaced, and then the homeowners’ warranty would pay the rest.

Wrong.

We still had to pay $375 more for parts and repairs that weren’t covered under the homeowners’ warranty.

The homeowners’ warranty paid $650, so that year, despite the annoyance and out-of-pocket expenses for the hot water heater replacement, the policy paid for itself.

Homeowners’ Warranty Will Only Help If the Appliance Dies

This year, after much thought, especially considering the bad experience with the hot water heater, we decided to renew the policy.  We paid another $650.

And then, our air conditioner started the march to a slow death.

First, it worked over time, running all the time, but it couldn’t seem to cool the house.

When our next electric bill came, it was $120 higher than usual.

But, the homeowners’ warranty wouldn’t pay anything for the air conditioner unless it was not working at all.

We called our own repair person and paid $200 to have two pounds of Freon replaced.  Two months later, and the cycle is repeating itself.  The air conditioner is working constantly, but the house is not cooling.  I’m guessing we are already out of Freon.

Now, we’re faced with a choice.  Wait for the unit to die so the homeowners’ warranty will cover the cost of the replacement, or replace it ourselves.

If we wait for the unit to die, the homeowners’ warranty may cover the majority of the cost, but we would have no say in the company doing the work or the replacement unit.  Meanwhile, we will keep paying to replace Freon and having higher than usual electric bills until the unit dies.

Or, we could replace it ourselves and stop the flow of wasted cash and energy caused by the old air conditioner.  We could choose the company we want to work with and what model we’d like as a replacement, the more energy efficient, the better.

While a homeowners’ warranty can save people money, in the long run, for us, it seems to be too much of a hassle and too restrictive to keep up with.

Do you have a homeowners’ warranty?  If so, do you find it valuable?

Your Children Will Grow and So Will Your Income

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Is your budget tight?  Have you slashed, and slashed, and slashed expenses but still find that there is no money left at the end of the month?    Do you find that your kids are eating more and more while grocery prices are increasing?  Do you despair at the news of rising egg costs?  Do you find that your grocery dollars don’t buy as much as they used to even a year ago?

Me, too.  I’m right there with you, but I’m here to tell you, don’t lose hope.  Things will improve. Your children will grow, but so will your income.

You May Not Have Thought You Could Survive the Baby Years

After I had my third child, I was overwhelmed, to say the least.  I was sleep deprived and exhausted trying to work from home to make money to pay down our debt, while helping my 7 year old with his homework and projects and caring for two kids under two.

Children will grow, so will your income
Original Image by Ray Dumas on Flickr

I thought I would never get a full night’s sleep again.  I couldn’t imagine a day without endless diaper changes.  I was in the thick of things.

But little by little, my kids gained independence.  First, one potty trained and then the next.  Hello diaper free days!

Then, one stopped using the stroller so I could move to a single stroller instead of a double one.  Then both grew up enough to not need the stroller.  Suddenly we could leave the house without a stroller or diaper bag.  Hello sweet freedom!

Gaining a bit of my life back was a gradual thing.  Each day now, my kids grow more and more independent and rely on me less for immediate needs.

Improving Your Finances Is a Gradual Process

I’m realizing, that even though my husband and I are in the thick of things financially, this time, too, shall pass.  Right now between braces, increased appetites, extracurricular activities, etc., we’re spending a lot of money.  Our budget is T-I-G-H-T.  But, in 13 years or so, all of our kids will be out of the house and on their own.

Not only will our life be our own, but our money will, too.  Just like I couldn’t imagine a full night’s sleep when my kids were little, I can’t imagine a month when our budget is not straining.  But I know it’s coming.

Once the kids move out, there are so many ways expenses go down.  You can move into a smaller house, if you’d like.  A minivan won’t be necessary anymore; a sedan will do just fine.  Two people eat much less than five, so groceries will be lower, too.

But it’s not just the increased expenses that will improve your bottom line.  There are the financial increases.  You and your spouse will continue to get raises.  If one parent stays home with the kids now, that parent can go back to work.  Having two incomes when you’re used to one can help you catch up financially, and quickly.

So, parents, don’t despair.  Finances will get better, especially if you remain disciplined and don’t upsize your life as your income increases and your expenses decrease.

Are you a parent of older or grown children?  If so, how have your finances changed over the years?  Are you a parent of young children?  Is your budget stretched, and stretched, and stretched?  Share your experiences!

 

Are Extracurricular Activities Necessary for Young Children?

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Little Amber is performing in her first dance recital.  She’s only three years old.  She feels pretty in her sparkly costume, and she likes the way her mom has done her hair.  But, she can’t remember many of the dance moves.  She and her classmates spend most of their time on the stage looking to the wings where their dance teacher hides from the audience behind the curtain and performs the moves with the girls.

Amber’s parents pay for dance recital pictures as well as a DVD to capture the memories.  In all, they spend about $200 on the recital, in addition to the regular lessons they pay for all year.

Plenty of parents have their young children in extracurricular activities and can relate to the experience and the price.  As parents we’re told again and again how vital extracurricular activities are for our children, but is this myth true?

Do we need to have our children in expensive extracurricular activities?

Falling for the Myth

Extracurricular ActivitiesWhen my oldest child was 4, we enrolled him in a few extracurricular activities.  This continued until he was 7 at which time we decided to get gazelle intense.  Our two youngest children had no opportunity to be involved in expensive extracurricular activities because of our tight budget.

What have I noticed?  While my oldest was a busy kid thanks to school, homework, and extracurriculars, my two youngest (now 5 and 6) have a lot more free time AND play time.  Sure, they fight (often), but I also see how creative they are.  Every day they’re coming up with new stories to act out and games to play.  Contrary to the myth that kids need to be involved in extracurricular activities, I find that my younger two seem to be better off without all of the extracurricular activities.

Are Extracurricular Activities in Preschool Necessary?

We’ve also bought into the myth that kids need to start a sport or activity early—the earlier the better.  If your daughter is going to have any chance of being successful in dance or gymnastics, she should start at 3 or 4.

But that’s not necessarily true.

“Misty Copeland, who has been promoted to top dancer at the prestigious American Ballet Theatre in New York. . .started ballet lessons at 13” (NPR).

Do You Have to Outsource?

You may think, rightly so, that some lessons like swim lessons shouldn’t wait until your children are older.  I would agree with that.  However, do you have to outsource the swim lessons?  Just this summer, I looked into swim lessons for my kids.  They were going to cost $200 for 5 days’ worth of lessons, 15 minutes per day per child.  Yikes!

Instead, my husband started taking the kids to the pool one by one and teaching them how to swim.  They love the one-on-one time with dad, and we love that we don’t have to pay $600 to teach three kids how to swim!

If you have your children in extracurricular activities, there’s nothing wrong with that.  However, if you choose not to, or you can’t because you can’t currently afford extracurricular activities, know that there are plenty of other ways to teach your children things like swimming.  Some of our best athletes, like Misty Copeland, don’t even begin their sport until their teens.  Your children will be fine.

How important do you think extracurricular activities are to young children?  Do you have your children enrolled in extracurricular activities, or do you choose not to?