Washing Money

29 Dec

money-washing-machine1

 Washing  Money

My friend (no real name given to protect the victim) let’s call her Anne, recently purchased a new LG front loading washer and dryer after her 15-year-old washing machine failed.  $2,092.07 later, Home Depot delivered and hauled off the old working dryer and broke washing machine.  Prior to this purchase, I pled with Anne to buy a used washing machine off of Craigslist.org for $50 and list her broken one for $15.  I have rinsed and repeated this tactic a few times with my rental properties with much success.

To make our math cleaner, let’s round down Anne’s purchase to $2000.  At first, one might assume Anne simply paid $2000 after sales tax for her new washer/dryer combo, but her tax rate is 25% and her FICA Tax is 7.65 as she earns EARNED INCOME.  Anne really paid $2969 ( $2000 / .6735  = $2969.56) for her new machines.

In contrast, If my washing machine failed, I would have had an outlay of $35 for a used washing machine (50 cost – $15 surplus for selling the broke one).  As I earn PORTFOLIO and PASSIVE INCOME, my tax rate would only be 15% from dividends (Portfolio Income) I earn that are paid out quarterly.  My true cost would be $41.17( $35 / .85  = $41.178)   Let’s round-up to $42.   This $2927 difference ($2969 – $42) is what is keeping most folks from early retirement/financial independence.

Now if you read/listen to what the marketing machine tells you, you will most likely follow the herd and purchase this new machine as it will save X amount of dollars in the long run as these newer models use less water, less electricity, less gremlins etc..  I call bullshit on the whole thing.  The break even point on this is almost not even worth calculating.  Why not take that $2927 savings and invest it to rid yourself of your cell phone bill for life.

 

Remember; pay off that debt, save and invest the rest, and join us on the other side and retire before you are dead.

 

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2 Responses to “Washing Money”

  1. Jen January 7, 2014 at 2:38 pm #

    Both my washer and dryer are from craigslist.. My dryer though, take a L O N G time to dry my clothes (like 3 times at 40 minutes or so) so I figure I am definately spending more on electricity for this thing. Wondering though, how much I am actually spending on it compared to what a new dryer would cost and when the break even would be on that….

  2. TnAndy January 7, 2014 at 6:17 pm #

    Jen,

    You might check you dryer. See if the air coming out the exhaust is hot. You may need a new heating element, thermostat or humidistat. All 3 are fairly easy to replace. Dryers are pretty simple compared to washers.

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