Here, this looks like an easy fix
Rather than obsess on how to save money, at CYC we focus on creating, building, maintaining and protecting wealth – regardless of how much you’ve already accumulated. We maintain that few measures that purport to save money are worth the time. (If you don’t believe us, go visit the simpleton who cans his own preserves and then calculates the savings to the second decimal place. He’s easy to find.)
Easy Street, here comes Trent
That doesn’t mean we can’t write about saving money. But as usual, we prefer to drop anchor where the big fish are. Given the choice between pocketing .07¢ on every serving of peach compote or saving thousands with a couple of keystrokes, we’ll take the latter every time. (And then, of course, invest the savings.)
Do you own a house? You should, given that the combination of prices and financing is at a historical nadir.
Once you’ve got a house, get a home protection plan. It’s not quite insurance, but the differences are inconsequential. For a nominal yearly fee, a plan will cover you if something breaks. It will.
NOTE: This is not an infomercial. American Home Shield isn’t paying us for this. We should probably charge them, but they don’t know we’re writing about this and we didn’t tell them. We’re just trying to sell you on the concept of spending a few bucks today to avoid spending a ton later.
CYC World Headquarters has a policy that costs less than $54 a month. Every time something breaks – something that requires a professional – there’s a $60 service fee.
There’s NO LIMIT to the number of calls we can make. It says so right there in the company literature. Practically speaking, even if everything you own breaks, that wouldn’t amount to more than 20 items in a year. And presumably, every warranty replacement would remain in good condition throughout the remainder of the year.
The policy covers easily repairable stuff that isn’t worth the price of a service call (e.g. smoke detectors, doorbells), but also covers other items that a lay person can spend the better part of a week toiling over before admitting defeat (e.g. water heaters; stupid fancy Swedish dishwashers that we bought because they looked so alluring on the retailer’s showroom floor, but not alluring enough to save the retailer from receivership, and which no one in the six-state area seemed to know how to fix.)
On average, a heating unit costs almost $2700 to repair; or more than 4 years’ worth of payments to the warrantor. An air conditioning unit costs over 3 years’ worth. Even a water heater can cost 11 months’ worth.
How does our warranty company make money? Who cares? Not our problem.
Wait, that’s not a fair nor satisfactory answer. We preach throughout the book that you should look at every transaction from the other party’s perspective. Determine if they’re screwing you over, or if they’re merely getting a fair price for a good service. In AHS’s case, the company profits by spreading out risk. AHS can almost guarantee its network of electrician and plumber affiliates a certain amount of work in each region where it has policyholders.
There’s an ancillary benefit too, which AHS doesn’t even publicize all that much. They give us non-obvious advice about how to maintain our things. (Non-obvious advice is the only kind we have any use for here at Control Your Cash, which you know if you’ve read us for any length.) For instance, who knew that a few pounds of lemon juice ice cubes will remove debris buildup on the sharp edges of a garbage disposal and put an end to that cacophonous whirring metal sound? It works in seconds, and it saves a visit from a plumber who’d rather be doing something challenging like a main line replacement or a boiler conversion.
That’s a win-win for both AHS and us: it reduces the likelihood that AHS will have to pay a technician, and it reduces the likelihood that we’ll require one in the first place. AHS would just as soon collect our money without having to do anything, and we’d just as soon not have stuff break. Plus we’re getting free, actionable knowledge: put into practice, that’s the very foundation of a worthwhile and productive life.
AHS doesn’t cover everything, but it covers enough. Fine, so we have to pay for own electrical face plates. Big deal. The peace of mind of knowing that we’ll never have to fix a well pump ourselves is more than worth the monthly fees.
**This article is featured in the Carnival of Personal Finance 329: California Dreaming Edition**
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Good post. On the point of looking at the transaction from the other party’s perspective – this angle makes insurance even more attractive for a consumer (all types of insurance, including home protection, but excluding appliance warranties).
The vast majority of insurers plan to lose money (or at the most, make a very, very small percentage) on policies themselves. They make money investing the deposits. So, from a consumer’s perspective the cost of the insurance is very close to, or often even less, than the expected value of the repair payout. Of course, if you discount the value of repairs back to today’s dollars, then the cost is higher, but that is still a small price to pay for avoiding a crippling repair.
I don’t know Trent, but he seems like a kind, sincere and HAPPY person who has helped many many people. Regardless, he doesn’t spend his blog real estate cutting other people down, calling them simpletons or making fun of how they choose to spend their time. I’ve got a few investment properties, and I’ve got a lot to learn still, so I started to look at your blog. But I’d rather take my advice from and give my time to someone who is moral and kind, and not someone who finds entertainment in putting other people down. Mean people = immoral. You lack morals, then you lack ethics in business. I don’t care how much money you have. You can’t take the money with you, but you can leave a legacy of kindness. Period.
That’s very hurtful. Why can’t you say something nice?
Alright, your comment deserves more than a two-sentence dismissal.
1) Like hell Trent doesn’t make fun of how people choose to spend their time. Go read his genius post from last year in which he tells women that they can save money on bathing suits by swimming in their bras, and then insists that he’s right even after seemingly every woman in the Western Hemisphere tells him that it’s almost physically impossible (never mind extremely trashy) to do so. Technically that’s berating people rather than making fun of them, but he’s in the ballpark.
But no, he’s convinced that the only swimsuits that exist are $3 Walmart ones and $80 Diane von Furstenberg numbers, with absolutely nothing in between. Time and again he tells his detractors that they’re being profligate if they spend more than he would spend (i.e., next to nothing) on a necessary piece of clothing; this coming from an overweight guy who owns $400 worth of cologne.
Look, if your idea of a competent blogger is someone who reminds his readers that they should brush their teeth and wash with soap, then Control Your Cash is almost certainly way beyond you.