Conquer Household Debt Demons

Almost all of us lock up our houses when we leave. Why? To keep burglars from coming in and taking our stuff, of course! However, when we do that, we are locking in a more dangerous set of debt demons. Statistically, the ones we lock inside are much more likely to drain bank accounts and increase debt levels and interest costs than the random house thief. I am talking about your household appliances!

Those sneaky refrigerators are silently lurking in your kitchens, the washers and dryers are skulking in your laundry rooms and the biggest monsters, your air conditioners and furnaces, are plotting in your basements.

The reason we cannot see these debt demons for what they are is that the human brain doesn’t do well with planning for painful, long-term events. That is exactly what household appliances count on.

Take an average refrigerator, which has a life span of about 17 years. You know you will probably have to replace it at some point. Everybody has to have a refrigerator! The average replacement cost: About $1,500.

Every day, we keep opening that fridge, seeing the little light come on and taking out cold food to eat. Until it stops. On that day, when the food is no longer cold, we cry and moan and go out and buy a new refrigerator pronto. Ideally, our brain has prompted us for 17 years to add $88.24 annually ($1,500 divided by 17) to a savings account for the day the food began to spoil. It had us build extra padding to bypass the repair-protection plans that retailers offer at an additional cost.

If we have not planned ahead and the money is not there, we use a credit card and that $1,500 balance is probably not going to be paid off in that billing cycle. That means our debt level and interest costs go up.

So how do you plan for these inevitable pitfalls? Take a survey of each of your household appliances. Write down their age, general condition and predicted kaput date. Do some research and figure out their replacement costs and start an appliance savings account. Easy. You just have to tell your lizard brain to do it.

P.S. Don’t even get me started on the biggest debt demon of all: your car! More on this later. In the meantime, follow the Department of Defense Office of Financial Readiness, or FINRED, on Facebook, Twitter and Instagram for more financial planning tips. Look for more on YouTube and the FINRED blog.

Written by Dave, an Accredited Financial Counselor® who has been helping families plan their finances for more than 30 years.