For some people, the budgeting question of whether to spend money on a home or a car is a simple one. While a home is your castle, and your opportunity to feel safe and comfortable with your family, a car can simply be a convenient way of getting around. However, in some circumstances, a car is crucial to a family ensuring that the bread-winners can get to work every day, and continue earning the money required to pay the mortgage, utilities and other living expenses. Regardless, addressing home and auto expenses is a common budgeting question.
Some will argue that both your home and car are equally important assets. However, the real budget question is not which one is more important, but rather how and where you budget your home and auto expenses.
If you’re wondering whether you should invest your money in your home, or your car, the following information should help you to make a more informed decision.
Budgeting Question – Choosing Home Improvements over Car Improvements
For many homeowners, their property will always come first. A home is the single biggest investment most people will make in their lifetime.
However, most importantly a home is an appreciable asset. Appreciable from the perspective that over time most homes will increase in value, providing the homeowner with equity and increasing their overall net worth.
From a budgeting perspective, there are two ways to approach spending money on your home.
- Maintenance – If a home will be your greatest investment maintaining it properly so it doesn’t lose value is an important aspect of homeownership. From new paint, minor roof repairs, to updated landscaping keeping your home in great shape assures it consistently increases in value over time.
- Major Improvements – The best part of home ownership and probably why you purchased your home in the first place was because you wanted to make it your own. Major improvements to your home beyond your own personal desires is the fact that major home improvements can dramatically increase the value of your home quickly. The top five ways to increase the value of your home through major improvements are:
- Bathroom remodel or upgrade
- Kitchen remodel
- Exterior Improvements – new siding, exterior doors, and new windows
- Adding an additional room like remodeling an attic or basement.
If you’re a do-it-yourselfer, I highly recommend Family Handyman Magazine, and 100 Things Every Homeowner Must Know. both are great resources for saving money on your home.
The most cost-effective means of paying for maintenance or major upgrades is by taking the time to save money to make the improvements. However, depending on your budget and circumstances your financial institution may provide a host of home equity loans that will allow you to make those improvements sooner.
There are even home improvement solutions that can help you to keep your finances in place over the long-term. For instance, you might look into loans that allow you to invest in solar powered panels for your home. That way you can reduce your energy costs over the long-term, and even earn a little bit of cash back by contributing to the energy grid. Or energy-saving rebates from your local electrical company for the installation of energy efficient appliances like a new water heater or heating system.
Budgeting Question – Choosing Car Improvements over Home Improvements
Generally, car improvements will often come second to home improvements when it comes to deciding where you should allocate your budget. However, it’s hard to discount the importance of vehicle improvements if you need your car to get to work, take the kids to school, or run the kids to soccer practice.
The most important aspect of owning a vehicle and how it relates to your budget and spending is that unlike your home which will typically increase in value over time, your vehicle will depreciate (lose value). In fact, if you purchase a new car, on average your new car will lose 50% of its value in the first five years – regardless of how well you maintain it.
So does that mean you shouldn’t budget any money for your vehicle? That home and auto expenses are really more about budgeting for your home?
The answer is no.
You should budget for proactive maintenance to extend the life of the vehicle as long as you possibly can. The perspective is that if your vehicle is going to depreciate anyway, you want to have it “work” for you as long as you possibly can. (My motto has always been, the best way to maximize the value of your vehicle is to drive it until it dies.)
When maintaining your vehicle, what shouldn’t you budget for? Fancy seat covers, a new stereo system, a shiny new paint job are all no-no’s – regardless of how much you spend to make your vehicle look great it will lose value anyway.
You should budget for:
- Regular oil changes & air filters – regular oil changes extend the life of your engine and how long your vehicle will last. Dirty air filters decrease the fuel efficiency of the vehicle. (What to budget for @$20-$75)
- Tires – driving habits will dictate how often you need new tires but on average and under normal driving conditions you will need to budget for new tires every four years. (What to budget for $525-$725 – four tires)
- Brake Pads – stopping is a good thing. Again driving habits will affect how often you will need new brakes but in general every 3-4 years – or when needed based on your driving habits. (What to budget for $200-$500 unless you can do them yourself. Installing your own brake pads will easily save you $200 in expenses)
- Incidentals – transmission fluid, brake fluid… the list can go on and on. Excluding major repairs, you probably won’t leave the repair shop for under $350. In my experience, you should budget for these types of maintenance issues every three years, although the age of your vehicle will dictate how often.
The most important thing you can do to manage your vehicles maintenance budget is that when the time comes to have your car serviced, be sure to shop around. Prices can vary dramatically depending on what you need to be done.
- How to Buy a Car With Cash
- Why I Buy Vehicles with Cash – I Just Spent $2,500 on Repairs and I’m Loving it
- 5 Quick Ways to Reduce Your Monthly Expenses
- How to Create a Simple Budget
- The Art of Being a Cheapskate – How I Successfully Manage My Budget
- 10 Successful Money Management Tips to Live By – from a 52-Year-Old
- Cutting Cable, Saving Money and Getting Comfortable with Feeling Uncomfortable
- How Surviving Wisconsin Winters is Like Managing Your Money
When deciding whether to improve your car over your home make sure that you don’t overlook important needs within your home, just to make your car more aesthetically appealing. Although many people consider their car to be something of a status symbol, a beautiful car won’t do much for you if you can’t afford to pay your utility bills, because you’re constantly fighting with the poor insulation factors of old drafty windows.
What If You Need Both?
These common budgeting questions are a fact of life. If you find yourself struggling with home and car requirements at the same time, then you’re going to need to think carefully about your options.
The best way to manage any of these situations is to proactively plan. And the best way to do that is to successfully manage your budget and save money in anticipation for these types of expenses.
- 100 Things Every Home Owner Must Know, at Amazon
- Family Handyman Make It Last: 750 Tips to Get the Most Out of Everything in Your House
- Auto Repair for Dummies
How do you manage these common budgeting questions for home and auto expenses? Comment below.