Tuesday, 19 October 2010

The true cost of decorating.

While we were away on holiday a month or so ago, I watched a 'house makeover' programme on TV.

I was intrigued to hear the makever guru describe how the new dining room table and chairs she was advising people to purchase was an 'investment piece'.  it cost £2,000/$3,000 and was white.  The chairs were covered in white leather, which, we were assured, would wipe clean.
Now this house belonged to a young couple with small children, and their kitchen was too small for a table, so presumably their kids will be eating at the white dining room table and the parents will now be getting tense about them dropping food on the new and expensive dining room carpet.

I remember how my kids used to sit at the table and play.  They used felt tip pens, paints, water and so on and it was great for them to be able to do that without worrying about our table, which was permanently covered in a heavy pvc coated table cloth.  So with a cloth on top of it, an expensive table would have looked just the same as a cheap one, and we bought a second hand good solid Ercol dining room table set for £35 from a local charity (thrift) shop.

In what sense, exactly is a dining room table an 'investment'?  An investment is something that increases the value of your money and can be sold (quickly and easily - ie when you need the money) for more than it cost.  A Chippendale  chair may be an investment, but not one you would make unless you already had money in easily-accessed tax free, safe savings.  But a white table will get stained.  And the chairs may be wipe clean but the leather will soon look used and the white will rub off in places.  The minute it leaves the shop the value becomes less than half of what you paid for it - and how on earth would you sell it anyway?  No investment this, then.

An investment has to be a realisable asset.  For most of us, even our house is not an investment.  
We need to live in it and cannot therefore easily sell it if we need some money, even if it has gone up in value.  It costs money for maintenance and to pay the mortgage, especially if we spend money on things that give no return like furniture, and is therefore actually a liability in financial terms.  It becomes an asset only if it can earn us money is some way. 
That could mean taking in a lodger so at least some of the costs are off-set.  It may mean using it to earn money such as by working from home as a child minder or moving your office to the house and therefore saving on rent for business premises if you are self-employed. It may even mean selling it, buying a cheaper one and investing the money.

We recently got a grant and interest free loan to install solar panels.  These give an electricity generating feed-in tariff in many European countries, so we get paid to generate electricity.  We used Renewable Resources and were very happy with them. give this blog a mention if you get in touch!  www.rr-ltd.com
The panels should be paid for by this tariff in ten years (using calculations of the average amount we should expect to generate).  The tariff is guaranteed for 25 years and is index linked.  Those are the magic words.  Anything that is index linked keeps up with inflation of course and that is very important.  For us it means the tariff will go up every year when there is any inflation, which will quite possibly make the payback time shorter.

So how else can you make your house an asset?
By spending money in a way that helps it to earn its keep.  That doesn't usually mean an expensive kitchen, bathroom or conservatory which are depreciating and unrealisable assets.
It does mean doing the sums regarding any money you spend on it.  For example, if you add insulation or double glazing what is the pay back time? If the payback time is long, are there other benefits, such as wanting to go out less or just getting a lot of pleasure from it?

We recently installed a wood burning stove.  It cost us quite a lot of money but is worth every penny.  We are spending more time at home, and both ourselves and our friends enjoy spending time here more. 
We are enjoying getting our exercise collecting and chopping free wood.
We had had a stove at our last house so knew we would enjoy wood gathering, and I have always preferred to get exercise in ways that are useful.
Once we have done something that saves us money and adds to the quality of life at the same time, I love to find yet more ways that it can save us money.  So the wood stove has a kettle on it right now, boiling water for tea.  The kettle cost me 50p/80c at a car boot sale.  It also has a saucepan on it cooking potatoes for tomorrow's dinner.  We have managed so far to resist spending money on trailers, wood sheds, chain saws and other things that tempt new wood stove owners!

So I am sitting here toasting nicely whilst not spending a penny keeping warm and cooking a meal at no extra cost.  In other words, our money is earning its keep.
Our stove cost about the same as the white dining table and chairs in that make over programme by the way.

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