- Our washer's motor is dead and it would cost around $200 to repair it. It's quite old though.
- "Oh no! We have to replace our stackable washer/dryer! What to do? What to do?"
- Let's look on Craigslist for one...There's some for $200 that are 5 years old but they may die soon on us.
- Let's look at new ones...Ugh they go for about $1000 on the low-end.
- Let's buy the new one with a 5 year warranty so we don't have to worry about it dieing soon.
You may ask how does that apply to my washer/dryer issue. If I bought the $1000 new model and considered current used prices as indicators of how much one of these depreciates, we're looking at about $160/yr depreciation of a new one after 5 years (($1000 - $200/5 = $160). Let's pretend I "bought" a used one for $1000, but $200 going to the seller and $800 going into an investment making 10% a year. What would my $800 investment look like?
- Year 1: $880
- Year 2: $968
- Year 3: $1064.80
- Year 4: $1171.28
- Year 5: $1288.41
That's all great math wise, but are we going to invest it? We are by paying off all our credit card debts, that's 20% APR, can't beat that! It means we won't be dipping into our emergency fund much and can still tackle debts this month instead of rebuilding our emergency fund.