While most Americans likely cringe at the idea initially, financing a home improvement project can be exciting. You’ve saved up your extra cents and assuming you haven’t lost all sense during the design phase, you’re ready to make changes to your home. It’s possible you’ve been dreaming of your perfect abode your whole life – admiring features of those you’ve visited for celebrations and holidays, or mansions you saw on MTV cribs in the 90’s (https://www.mtv.com/shows/mtv-cribs) – but however you decide to remodel your home, it will take more than just a sharp eye.
As we review financing options this week, there’s one option that’s always available, and often leads to better deals overall: paying by cash or check. The beauty of this option is that if you can afford it, you pay off your home upgrades quicker, without paying any interest on the purchase, and if you decide to go solar, you own the panels outright immediately. Buying solar is similar to buying a car, so if you finance the purchase, you can drive the car, take it wherever you want, paint it, or change the rims – however you’re still paying off the loan after you drive away from the dealership.
Solar panels operate in the same way, in that once you purchase and install them you’re able to start producing energy and exporting it to the grid immediately (or at least upon Permission to Operate, or PTO), however it will likely take you time to pay off the full loan amount. If you buy a car with cash however, you’re not stuck with interest payments that increase the loan amount – you simply get to drive away in a brand new car, making insurance payments and filling it up with gas and oil whenever needed.
Solar panels don’t require gas or insurance, however you might need service on them in the future if squirrels decide to chew through the wiring, for example.
Getting back to the question at hand however (how to finance your home improvement project if you don’t want to go with a finance company), unless you’re planning to win the lottery or becoming a millionaire soon with a get-rich-quick scheme, it’s important to know how to save money, and over the years I’ve learned a few good tricks for how to do just that:
- The envelope technique: https://www.dailymail.co.uk/femail/article-7846813/Envelope-help-save-extra-5-050-end-2020.html
- The 30-day rule: https://www.livemint.com/money/personal-finance/want-to-control-your-spending-try-the-30-day-rule-11623856832156.html
- The 50-30-20 rule: https://www.nerdwallet.com/article/finance/how-to-budget
One important thing to consider however, is that your home improvement purchases, including solar panels, vary greatly from a car purchase because you also want to think about increasing the equity of the home. Ideally, your home doesn’t depreciate in value over time, as a car would. So it’s even more important to make smart investments that will protect your investment when possible.
For example, new gutters may not look as nice as a new kitchen, however they will protect your foundation, particularly if you live in an area with a lot of rainfall (check out our previous blog on gutters, here: https://suntexllc.com/hate-rainy-days-in-texas-gotta-have-gutters/ and here: https://suntexllc.com/just-like-that-gutters-are-up/). Another example of a home-improvement equity investment is new windows or insulation – both can reduce your energy costs leading to energy savings year-round, but also protect your home from weather damage since they could keep your home drier and warmer in the winter months (and cooler in the summer).
If you still have enough left over to re-do your kitchen or bath, do it by all means! However if like most middle-class Americans you have to prioritize one project over the other, make sure your investment will protect your home, and bring you joy as well (since at the end of the day, this is really the most important factor in a home improvement project!). If you’ve saved up to do repairs or home improvements, you’ve already put in the hard work to get here, so it’s time to embrace your inner Donna (from Parks and Rec, https://www.youtube.com/watch?v=gSjM5B3QNlw), and Treat Yo’ Self!
What home improvements have you been dreaming of, and what are your financing recommendations? Post your suggestions in the comments below, and be sure to check out the prior blogs from this week for more ideas!