Fear for Sale

I hear these ads on the radio and we get these doom and gloom flyers in the mail for extended warranties on our cars and house. An engine failure could be $5,000.00! What are you going to do when the big one hits?

Your furnace. It’s determined to freeze you out on the coldest day of winter. We prevent this. Our home warranty gives you peace of mind.

You’re protected from the epic home or car fail. And it’s coming. It’s going to be bad. It’s going to be scary. It only happens on Christmas day, the Fourth of July, or 10 minutes before the guests show up for your kid’s birthday party.

In truth, these things can and do happen, but is ‘peace of mind’ worth thousands of dollars that you could keep in your bank account for these inevitable events? What if you put your peace of mind in the wrong place? You have a $2,000 dollar extended warranty on your Toyota (which if you change the oil once every five years will last you twenty), but you didn’t cover your furnace? Your inside water piping? That home computer? If you own a house or a car, things are going to happen, and you don't know which thing will fail and when (or do you?). It’s a fact of life in our current culture where even durable goods are disposable.

So… what is one to do? 

First, don’t waste a nickel on extended warranties. If you hedge on every high value item you own, you’re soon putting out enough money to replace the very thing you’re insuring against! Second, open up a spreadsheet and start keeping track of stuff. With three or four extremely simple columns and a few minutes of your time, you can take control of your financial life. That’s a gross oversimplification, of course, but check this out:

Date	Item	Cost	Expected Lifetime	Notes
2/14/2015	Furnace	$6,000	12 years (2027)	5 year warranty
5/1/2017	Dryer	$400	7-10 years (2024)	2 year warranty
7/2/2017	Gutters cleaned	$100	yearly	XYZ Landscaping (410)555.1212

You can make this as simple or complicated as you want, but here’s the deal: By taking a few minutes to keep track of these purchases and their average lifetimes, you greatly reduce the oh-crap moments in your life. Not only that, but you can budget and save for them, which provides way more peace of mind than some extended warranty contract where the voice on the other end of the phone has a job, and that job is to prevent you from getting the peace of mind you were paying for that whole time! As an added bonus, when your mechanic suggests the new air filter or gives you that tsk-tsk look as he or she tells you how badly you need new front brakes, you can tell them to pack sand since it’s only been 4 months since you had them changed. You’re all over that stuff because you keep track of it!

Like most adults, you’re probably stretched for time, and kicking notes into a spreadsheet sounds like a giant PITA. However, flailing to find an HVAC outfit the day of your amazing 1960’s themed cocktail party, having your car break down because you should have changed your timing belt 30,000 miles ago, or something as simple as missing a flight to Cancun because you forgot to renew your passport all waste WAY more time than that few minutes keeping track of it in Excel.

Naturally, there’s some awesome, sloth-like joy in just being flotsam, letting life happen to you and just taking it as it comes. I call that my 20s. We can all do better, save a bundle in the process, and enjoy the peace of mind that comes from having life under control.