Tuesday, October 09, 2007

To budget or splurge???

Here's the scenario...If you were remodelling your bathroom, and found tile you loved but it cost an extra $1.40 than you budgeted/expected. Meaning you had set your budget for $5 but found stuff you loved for $6.40 instead. This extra would cost you $700 extra to finish your project. Now you had come in and extra $200 on other items for your renovation. So it would just cost $500 extra.

Now would you pay the extra $500 and buy the nicer tile? Or would you buy tile you didn't love just because it fit in the budget?

Extra information. The couple is very financially wise. In fact they try to emulate the millionaire next door theory. So they coupon shop, and sometimes go overboard with being frugal. They save the maximum in your retirement accounts, have no debt except the mortgage. In fact their mortgage is due to paid off in 6 more years at 43. You pay extra money to the mortgage every month. They can afford the $500/month because they pay $1800/month extra to the mortgage, in fact they barely break a sweat.

But what should they do? Take an extra $500 and buy the tile they like? Or not buy the tile and stick to their original budget. Also they have extra cash in other sinking funds, so they can still make their $1800/month extra mortgage payment and instead slowly pay back their extra pot of money.

What should they do?

3 comments:

MEG said...

I would splurge for the tile I love. They are going to have to look at it every day, and they can easily afford to get what they really want. Plus if they don't love the budget tile, they'll regret the $500 decision every time they see it.

Besides, these people are so responsible. I bet they rarely break their strict or splurge for anything they really want (which they can easily afford to do). They pay $1,800 EXTRA on their mortgage each month?! And maxing retirement accounts?

Unless there's something I'm missing (like they want to retire in 4 years but only have $100,000 saved), then buy the nicer tile and enjoy it!

Boomie said...

The tile is not an expense. It is an investment. What will the rate of return be on the better tile? I'm sure a prospective future buyer will like it also, thus raise the value of the house. Bathrooms & kitchens sell house. Those rooms should look as good as is possible.
Can they cut $500 somewhere else off their budget? That's what I do. If I want a splurge, something else has to be cut. Things should balance out.

Living Almost Large said...

Actually Boomie, it was at an auction so the tile for $1.40 was a better quality of tile.

Also it cost more because it was a 12x12 tile which is more attractive and easier to lay than the 16x16 tile they bought. But guess I should add that it cost more because they needed to buy more tiles.

Also if you know tile then a 16x16 is not an attractive size.

Hadn't even considered the investment issue because to a house is a home.