20 Nov How to Avoid Making a Huge Financial Mistake

So, I am terrible at consistently blogging. It’s been like 10 years since my last post. My kids are grown now (not really). I really should try harder. For the 4 people who keep up with this blog I am sorry (Just kidding, there’s actually 7 of you). Anyway, my excuse for this last hiatus is somewhat legitimate, during this time I fixed up my old house to sell, sold it for a decent profit, purchased a foreclosed property, and have done quite a bit of work fixing it up. This brings me to my most recent (almost) financial mistake. Yes, I make financial mistakes. I would like to think I make less than most, but I still make some. Recently, at my new house the heater went out. This is a very dangerous situation to be in literally and financially. Rule 1 for large financial decisions is do not make them based on fear or emotion. The problem is, when you are literally freezing (or melting if your a/c goes out in the summer) in your own house there are few options but to fix the problem very quickly. Sometimes it takes days to get people out to give bids and that is not really acceptable. However, it is also not acceptable to spend $4-$8k if you do not have to, even if it means being cold for a few days and/or spending a few nights at a hotel or with family. Let me break this down.

Remember, you should spend at least 3 months salary on a new system! (or is that diamonds?)

Remember, you should spend at least 3 months salary on a new system! (or is that diamonds?)

I purchased the house knowing the HVAC was 15 years old and it might not make it too much longer. I had a preexisting notion that if it went out it would not be worth fixing because it is old and inefficient. That was mistake number one. I don’t know enough about HVAC units to make that declaration and unless you are a qualified technician neither do you. So if your unit goes out the first step is to assume it can be fixed. Now, what you should do right now (even if your unit is working fine) is ask around for references for a quality honest HVAC tech. Because when you need one you don’t want to waste time trying to find one and sift through all the ones waiting to take advantage of you in an emotional time. Anyway, what I did was assume it needed to be replaced (bad assumption) and I contacted 5 or 6 places to get bids on a new system. Now, normally I wouldn’t be so quick to spend $5 -$6k but I thought I had the home warranty (since I just bought my house). I don’t recommend those by the way unless you are willing to take them to court, but that’s another issue.

I ended up getting about 4 quotes ranging from $4-$6k for a whole new system, they give quite a discount to do both the outside unit and furnace at the same time. I then called my real estate agent and asked if the seller provided a home warranty and found that they did not. I mistakenly thought they did. Now the sitch is gettin real as the kids say. Luckily I just couldn’t stomach the cost and had one last guy come by for a bid who was recommended by some real estate investor friends. He happened to be named Wayne and he was Mr. old school no BS contractor guy. He shows up and says he wont even give us a bid if we’re just collecting bids and going with the lowest one, because we will end up getting screwed that way. He says he wants to look at the unit and see if it even needs replaced. He then proceeds to drop some knowledge on us about our unit, as he used to sell them new 20 years ago. He says they are well made and should easily last another 5-10 years. He breaks out his tool bag and starts tearing stuff apart and testing voltages and doing some HVAC wizardry. None of the other guys did this apparently. His final report was that the A-coil needed cleaned and some other stuff needed tightened or some such general maintenance that was leading to some auto-shutoff kicking into place. Basically it was a service call instead of $5000 for a new system. Works fine now. Thanks to Big Poppa Wayne which he shall henceforth be called. (Full disclosure I never even met him in person, I spoke with him on the phone and he did his work when my wife and mother were home, these are second hand accounts and what I imagine to be true).

I think this is a picture of Big Poppa Wayne, clearly he is a man who takes care of business.

I think this is a picture of Big Poppa Wayne, clearly he is a man who takes care of business.

Some of you might be thinking: of course you get it fixed, but we had 3 other places not even check it out, with the first place telling us it indeed need to be replaced and was leaking carbon monoxide (which is not true but on a side note have carbon monoxide detectors close by and on every floor and sleeping area), even though they did not do the extensive check that my new friend Big Poppa Wayne did. So the key is not getting a lot of bids, but getting them from someone you can trust. This goes for any large purchase you are going to make. First, sleep on it, even if it seems like a decision must be made now (it almost always can be delayed). Second, get an outside opinion from someone you trust (friend, family member), preferably someone who makes wise financial decisions. Third, if it is a good or service be sure to get some references, read some reviews, and do your due diligence. Do not make decisions based on pressure, emotion, or a self imposed deadline. You will almost always make a bad decision in these circumstances. And once you sign on the dotted line it usually takes a lot of time and pain to fix. It can take 5 minutes to get into deep debt and 5 years (or more) to get out. Be smart, be diligent, and please don’t make the same mistake twice like I almost did with this HVAC debacle. (Did I mention I bought a new system at my last house? Oh I didn’t? Well lets not talk about that).

Message to Claire:

One or both were probably crying 10 seconds later.

One or both were probably crying 10 seconds later.

If there is one rule in life to live by when it comes to decision making, it should be “sleep on it”. I know I don’t follow it enough but when I do it is amazing how often my mind changes. You think clearer when you are not in the moment, especially when it comes to spending money. There are so many times I get excited about buying a particular item and start researching it and trying to find a deal or something cool only to get sidetracked by something else. When I think about it the next day or even a little bit later I often decide it’s not something I need or want enough to spend the money on. Obviously depending on the amount and your income this isn’t necessary for every purchase. But for those with low incomes this may come up fairly often. There is a saying “A fool and his money are soon parted”. Don’t be a fool. I will teach you better so you won’t have an excuse. Also in case you invent time traveling and read this in the future go back and tell your 4 year old self right now to stop throwing tantrums when we will tell you that you can’t feed your stuffed animal real food. Love you

© Ryan DeLeon and The Debt Free Baby, 2014. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Ryan DeLeon and The Debt Free Baby with appropriate and specific direction to the original content.