Everyone has a plan until they get punched in the mouth.Mike Tyson
We had a big blow (punch to the mouth) to our budget, as our air conditioner has gone out. I am torn between this being a financial catastrophe, just when we were getting our affairs in order, and being a blessing that it happened now and not a month from now when the heat would be unbearable. We knew last week that this was a possibility, and after talking with a neighbor who had these things replaced last year, we decided we would try to push the unit through the summer, so we could possibly save up for a new one next year. Then it just went out.
We did some research and found a company with good ratings that was a little less expensive than others. They give a big discount if you do both the AC and the furnace together. Our home is 20 years old and the furnace is not it great condition either. We decided that it is best to do both to save us trouble in the winter time.
The financials: this will cost us $8,200 in money that we do not have. They offer a 2% payment option for 18 months at 0% interest. So, that means the clock is ticking and we have 18 months to pay this off. The good side though, is our current AC and furnace are so old that they are not very efficient. Our electric bill in the summer goes all the way up to $400 a month for 3 months or $1,200 just for those months. My gas bill in the winter is about $200 a month for 3 months or $600. We are supposed to get a huge reduction in our bills to around $100 in the summer and $50 in the winter. I will put it at a low estimate of $1,000 a year. That would mean this unit will pay for itself in 8 years. There is also a $350 rebate and a $200 tax credit.
The plan: I am not sure if this will work, but we plan to pay the minimum payment, I do not yet know what that will be, but it will not be very high, until we get our tax return, (usually a couple of thousand) and a bonus in March, (generally a few thousand) and that should take care of somewhere in the neighborhood of $5,000 – $6,000.
For the rest of the amount, I will use the money I save in energy and either a raise to pay more on it, or if it happens to get close to the 18 months and there is still a balance owed, to transfer it to a new credit card to ensure I am not hit with any interest. The balance will be the test and I will need to use the snowball debt principles to make sure it is paid off before the 18 months or continue after I transfer it to another card.
The result will be a more efficient energy furnace and AC, which should save us money throughout the year, however it will be a burden on our budget and a huge cost that could have otherwise been used for something else, such as a reduction of my 2nd mortgage or put away in savings. I am beginning to wonder if I will ever be able to save enough for an adequate emergency fund, but again I am thankful to have a plan.