Reprioritizing Finances

My partner and I only buy what we have money for, and do not spend what we don't have. We are loathe to take loans. The only loan we have is a small first mortgage on our primary residence, which will be paid off in a few years. We have no car or motorcycle payments ... nada ... we believe in paying as we go and saving for long-term goals. We are both products of parents who lived through the Great Depression, and their frugal approach to household finances rubbed off on both of us.

The other day, my partner and I sat down to review our finances. We had been considering having a major renovation of our kitchen done this summer. However, we had to do a major "re-do" of our upstairs hallway and bedroom flooring which became a priority since my partner accidentally ruined the carpet by carrying a leaky bottle of drain cleaner from one end of the house to the other, ruining the carpet unintentionally as he went. (Here is the final outcome of the new hallway and bedroom hardwood flooring).

Meanwhile, we continued with planning to replace kitchen countertops, flooring, and appliances, and had done a fair amount of shopping and price comparisons for this work. The problem is that when I built our house, I built an unusually large chef's kitchen -- it's 20' x 30' (6.1m x 9.1m) -- and thus it requires much more flooring and countertops than an average kitchen would.

When we computed what it would cost to have this work done, with and without labor, we realized that we have more saving to do before we can afford what we want. We're not quite there yet. Sure, we could take out a loan and have it done now, but what we have is still functional, and we can live with it for a year or two more. We may replace the old refrigerator sooner than later as it is about to break down (and we can take advantage of the energy-saving appliance purchase rebates available now), but that's about it.

Further, I've decided that while a new Langlitz motorcycle jacket would be nice, I do not want to shell out US$700 for it. It is too pricey. The motorcycle jackets I wear now suit me fine. They will probably carry me through the rest of the years that I can ride. While I can drool over such a high-quality product, reality dictates that it would be a frivolous expense to buy new leathers when what I currently have serves the purpose.

It is time to reverse three months of negative cash flow and rebuild our reserves. Our joint reserve fund had gotten down to nine months, and we like to keep it at twelve. What I mean by that is that we keep a reserve fund that will keep the bills paid and household running if neither my partner nor I are able to work and experience a disruption in income. The reserve provides a good cushion to absorb unexpected expenses, like replacing the flooring and carpeting on our home's second floor.

Life is short: save for a rainy day