I’ve been obsessed with personal finances for as long as I can remember. So even though I’m only 25-years-old, I feel I’ve talked with a lot of people about their money. There are two groups of people I talk to about making money. One group focuses on saving money, the other on making money. What I want to talk with you today is about the former group.
This group of money savers breaks down into 2 categories: those who are outright cheap and those who look for good value. Let’s use an asset as a way to exemplify their behavior. Let’s talk about homes. People who are cheap don’t fix anything unless it MUST be done. The roof doesn’t get fixed until it begins to leak. The shag carpet doesn’t get replaced until you almost see the floorboards underneath.
You may be thinking those cheap people are ones who get wealthy fastest. After all, they spend the least amount of money. But keep in mind, they don’t generally make much money either. Measuring your money success is not about how much you can save, it’s about measuring your net worth. What I suggest in this post is you can have a higher net worth by fixing and remodeling your home, taking proper care of your car, making sure the office furniture in your business is in good shape, etc.
When something breaks or becomes outdated, you may be tempted not to fix it. You’ll save money and maybe fix it later. But here’s the thing. Eventually you will need to sell that house. It may be because you’ve been foreclosed on. It may be because you’ve become disabled. It may be for more joyous reasons. You may have triplets who can’t all comfortably fit in the house. Or you may decide to move to a nicer neighborhood. Whatever the reason, that house is gonna sell under your watch.
It’s no secret that better looking and better maintained homes command more money. So why not keep your house looking great and maintained well for the next owner? Not only will you get more money but you will also have had a more enjoyable time in the home.
Imagine this. The paint starts peeling on your house. Instead of repainting it, you decide to save hundreds of dollars and avoid the problem. Great – you’re hundreds of dollars richer than you would be otherwise. However, no real estate agent is going to want to sell a home with flaking paint. They won’t be able to make as much commission that way. You won’t get as much money. It’s a bad deal all the way around. So eventually you repaint the house prior to its sale. Even though you’ve repainted it, you waited so long the boards are weathered. The paint doesn’t lay flat because the boards are warped. This slightly lowers the value of your home. Also, you weren’t able to enjoy a nicely painted house when you lived there. There’s an initial win by not painting – but there’s a large long-term loss.
The same rule goes for your car. It’s smart to fix any problems as they arise – unless your car is a total beater which is getting to the point of no return.
Eventually you’ll want to sell the car. If it has problems – even small problems – it’ll be a turnoff to the buyer. Small negative things really impact the buyer’s perception. Think about it. If you were looking to buy a car that looked a little neglected, would you think it was reliable? Probably not. You wouldn’t pay as much either.
With a home, you may have to make an unexpected exit because of health or a money crisis. With a car, you may have to make an unexpected exit because it was involved in a crash. A few years back, I was involved in a crash. A few short days after the crash, I had to get the car appraised. The insurance agent told me even things like having the car washed made a difference in its valuation price. I think we got like $3500 for a 1996 domestic with over 300,000 miles. Of course it had been recently waxed and all maintenance had been taken care of. It was a nice looking car.
Before you sell something, you want it in the best shape possible. Why not always keep your things in the best shape possible. Your time with them will be more enjoyable and you’ll make more money at the end of the day. It’s a win-win.
Go ahead… fix and remodel your home. What should you get fixed right now?
I’m a personal finance freelance writer and webmaster. I welcome you to visit me at www.thefrugalpreneur.com