Most people don’t really budget for things that are large on a yearly or even monthly scale, but you can and probably should.
For example, I know that I use my headphones a lot and being without them would be really annoying. Budgeting based on buying them asap because I need them is a really painful way of managing that cost because I can’t do anything else at the same time and it is expensive. If instead I set aside a smaller amount while I still have working headphones it is much easier.
My formula for working out the cost is fairly simple. How much does it cost for an item to fill the need? How long do I expect that item to last in the worst case? How much would I therefore need to save per week for that cost to be saved before the current item needs replacement.
My headphones cost around $100. I expect to need replacement not sooner than about 16 months. So I should save $75 per year which works out to less than $2 per week. If I just save $2 per week I will hit my goal of $100 within the year and of something goes wrong earlier I can make the difference up the normal way. If I end up not needing a replacement by the time I hit my goal I can keep saving for a higher cost option or move that saving to another goal to boost that.
One downside i see with this is that it is often unclear how long an item will last. For example, I bought my dishwasher in 2021. When will they need to be replaced? The last one lasted 24 years, but I’m not going to bet on the new one lasting as long.
For that example, it should be in your home maintenance budget. That’s a major appliance. It’s going to fall into the same “major unexpected failure” category as anything else in your home.
Right. Basically, I can assume that at at least one thing in the household breaks each year. This year, it was the microwave oven.
Nice thing is that used microwaves are all over thrift stores for like $10 a pop. Our coffee maker broke this month and we got the best coffee maker we’ve ever had for $6.
Yes, and items seem to be manufactured to exceed their warranty period by only a short time. I assume that an item will last for a year in most cases, or the warranty period if that is longer. For white goods like a fridge or a washing machine I look for statistics and use longevity as part of my purchasing process, so I aim to buy appliances which will last a fairly long time and then save based on that not being the most likely outcome. My fridge can be expected to last 5-7 years, so by year 3 I will have enough saved or room made in lines of credit to afford a replacement. Obviously it is best to have nothing accruing interest so I will tend to pay credit down first but some if the credit cards where I am actually have good terms such as a 36 month interest free period. The utility of money during that time is available for other things and I can reduce my costs in other ways.