Personal Finance Advice

How do you know it’s time to actually replace something old with something new? Can you justify the purchase of something expensive like a car or a major appliance just because the old one is no longer aesthetically pleasing, or should you run everything you own into the ground before you actually consider paying for a replacement?

If you are in the midst of trying to pay off debt and build up a decent savings account, then the answer is easy. You should hold on to things as long as they are functioning. Your car may have long ago lost the new-car smell, but if it gets you from point A to point B without big hassles then you should hold on to it especially if it is paid off. Your fridge may not have an automatic ice maker, but if it still keeps everything cold then just buy ice trays.

In other words, why replace something that functions?

It’s another situation if you’re not really dealing with too much debt and you already have a respectable emergency fund built up. This is when you may feel as though replacing a functioning item for something that is a little more pleasing to the eye is not such a bad idea. Yes, you want to feel good about the car you drive. You want to be pleased by the appliances you have in your kitchen. When does replacing something that still works become okay?

Ask yourself a few questions:

1. Can you afford the new purchase?
2. Will the new item have features the older one didn’t have?
3. Will it make you happy?

While nobody makes the claim that happiness lies in a new car or a new washing machine, you can certainly be happy about a purchase…especially if the features far surpass the features on the previous item.

If you’re in the process of getting your finances in order then this is not the time to jump into a large purchase if you already have something that works fine. On the other hand, if you are comfortable with your finances and you want to replace something that still functions, do so only if you can afford it and it will perform better.

If you are going to buy something new, be sure to consider donating the old item to a charitable organization.

Creditors and financial institutions are far from perfect. Once in a while errors might show up on your statements that can cost you some money you don’t actually owe. For example, you might encounter a late fee even though you know for sure that your payment was sent in on time. Or in another instance you might find a balance forward on a statement when you in fact had no balance the previous month. Whatever the instance, you should never assume that something must be true just because it shows up on a statement.

If something seems wrong, call the company. You never know if your file got mixed up with someone else’s file or if maybe a computer error caused your account to receive some fees by mistake. Even the most streamlined billing system can encounter glitches once in a while, so you should never feel silly about calling to ask about something that doesn’t seem quite right.

Keep an eye out for these types of errors:

• Fees you didn’t actually incur (late fees, over the limit fees, etc)
• Purchases you didn’t make
• Statement adjustments you didn’t request

You should be equally concerned if you find adjustments on your statement that appear to be in your favor if you don’t know where they came from. If you discover a $50 credit adjustment, don’t just celebrate your good fortune and go spend the extra $50. Call the company and find out if the money is actually yours. Besides the fact that the money may not actually belong to you, there is a good chance that if it is indeed a mistake it will be discovered sooner or later and the money will be taken right back out of your account.

Of course, this all points to the fact that you need to review your statements every month instead of just tossing them aside. Look at it this way: Every statement has the potential to have errors on it that may cost you money. Shouldn’t you take a moment to have a look?

“Value” is a relatively abstract term when you stop to think about it. The diamond ring on your wife’s finger is worth something because society tells you it is. Really, though, what does the diamond ring do? It sparkles and makes her smile, but does it fulfill any basic need making it valuable?

Likewise for people who hoard collectibles in an attempt to witness the monetary appreciation of the collectibles and then someday sell them for a handsome profit. These people realize that there is inherent risk to this practice, because who is to say what the public will actually deem valuable within a few years?

For this reason, think twice before “investing” in something that you think is valuable, but which may not have any monetary value down the road. For example, if you want to buy a collection of first-edition comic books you should do it because you want to. You shouldn’t buy the comic books in lieu of putting money in the bank.

In other words, don’t justify a splurge by claiming it’s an investment when in fact it’s just something you want to own.

There is nothing wrong with buying sparkly diamonds or classic toys or even bricks of gold as long as these aren’t your only means by which to save for a rainy day. After all, if you find yourself in a financial crisis, what would you rather have in your corner: a nicely-padded investment account or a wall lined with limited edition collectible plates?