Sunday, June 24, 2007

Why a Budget Matters

My hard drive on my big desktop machine crashed yesterday. That PC is the one I use for all my blogging and web surfing. It's about three years old and runs Windows XP. At first, I didn't know what the problem was so I went out shopping for a new PC. All I do with it is blog, surf, edit images and videos, store my AV files and a bit of MS Office. I don't need a big gamer's machine. At BestBuy I found a nice ACER desktop for $529. Offhand, I asked what a new hard drive cost, just in case that was the problem. They said about $120.

This is where I really needed a household budget. While I follow most of Dave Ramsey's advice, I don't keep a budget. I just don't spend money on anything I don't need. I've managed to pay off all my debts except my mortgage and have salted some cash away in the bank. I'm in good shape and this expense could be handled easily. I almost bought the machine.

I decided to leave BestBuy and think about it. I tried to make a business case for the purchase. My choices were a new PC running Vista with all kinds of upgrades or a new hard drive and $400. It was then that I realized that my lack of a budget was damaging my decision process. Since I had no money set aside for computers or entertainment, I had no hard decision to make. It wasn't the PC vs. going out to eat, it was just a decision to buy a PC.

Good business decisions are not made like that. Sound decisions are made on marginal analysis. That is, will I get the same return by buying the PC vs. saving the money vs. $400 worth of clothes vs... Without the budget, the money simply came from out of the blue and had no intrinsic value. Had it been budgeted for clothes, my ugrade decision would have been new shoes and some shirts or a new PC.

After I went home, I was able to boot the machine and listen to the noises it made. It was clearly the hard drive and nothing else was wrong. I have decided to just replace the drive, but I'm really wrestling with the underlying problem of not having a budget. I've avoided it because it's a little work and I've been doing OK without one. This experience shows just how close I come, day in and day out, to making bad financial decisions without one.

So now that I'm done with that decision, I have to ask: Will I see you at the Festival of Frugality? I'll be there. You'll know it's me because I'll be the one talking about my new hard drive. And my new budget

Update: By the way, I lost ZERO data because I use Mozy to backup my files over the Internet. That was one of the best decisions I ever made. Mozy rocks!

6 comments:

Justin said...

I've got an external hard drive I use for backups. It's actually the old hard drive I had in my system. I'd bought a new SATA hard drive when I thought I'd killed the other one. I later figured out that the problem was actually with the motherboard and not the HDD like I'd suspected.

Instead of cashing in on the warranty I went ahead and upgraded because I'd planned on doing it in the near future anyway. The hard drive purchase ended up working out because there was only one IDE port on the new board, and you never hook a hard drive and optical drive on the same cable because it forces your hard drive to work at a slower speed, killing system performance.

I happened to have an IDE hard drive enclosure that I'd bought to pull data off a hard drive from a fried computer. I put the old drive in there and use it as an external now.

If any of that makes sense....

K T Cat said...

That sounds like recycling even a Green would be proud of. :-)

Kelly the little black dog said...

Three years is really too short for a home machine life span. One approach is to have an idea of how long hardware should last. A minimum of five years is more like it. Consumer's Reports recently had an issue weighing the pros and cons of repairing vs. replacing a wide variety of home appliances.

I took a community college course on PC repair - one evening a week. Now I know how to replace most components in a typical machine. I've extended an old machine twice at minimal cost by replacing a hard disk and power supply. You can often find old machines to cannibalize for for parts for free.

I look at it as if its a car. Would you replace a car when it blows something you can easily fix yourself?

I only consider a new machine when it can't do what I want it to do any more. So replacement is now a function of utility. I'm typing this now on an old laptop with a sticky keyboard, but I only use it for web surfing and email so there isn't a reason to replace it.

So I don't have a budget per say, but have an idea of what the replacement schedule should be.

Unknown said...

Probably it is the hard drive - am gonna check out mozy - thanks for introducing it!

K T Cat said...

Kelly,

Outstanding comment. That's the same conclusion I came to, but only after a bit of thinking.

Anonymous said...

Excellent points, all. It reminds me that I need to go through and do backups, actually. ;-)
I faced this last year. My VAIO crashed thanks to a virus, and I had to make figure out the logistics of trying to finance a new one (augh!) as a then single mom when I realized I could probably just use the hand-me-down my folks had given my daughter "for games" when they purchased a new 'puter. I hooked that puppy up and lo and behold it was actually faster than my laptop had been! Who knew??? Thank goodness I gave it a shot or I'd still be in debt thanks to that VAIO, which a friend savvy in IT later fixed - for free- and I gave to my daughter for her troubles.