Stop Losing Money in the Kitchen

Life isn’t Million Dollar Listing!

We live in a 24-7 HGTV world.  Magazines, websites, internet shopping, luxury lifestyle reality television… coupled with cheap, readily available credit…. have folks convinced that a super high luxury level is the minimum acceptable baseline.

Nowhere is this trend more out of control than in the kitchen.

It’s so nonsensical.  People are cooking less than ever before (what with going out to eat and prepared grocery meals), yet demand for high end appliances, marble countertops (“stainless and granite!” should be HGTV’s tagline) a farmhouse sink and a subway tile backsplash has never been higher.

Kitchens are now a status symbol.

But just like a 2008 Ford Focus will still get you from Point A to Point B, a 1990 kitchen will still churn out great food.

Here’s my kitchen.  White appliances, laminate countertop, linoleum floor.  Horrible layout.

Every time my mother walks into my kitchen, she talks about how someday I’ll update it.  Maybe, but probably not.

For one thing, I’m not convinced it would be a “dollars in/dollars out” situation.  The house has so many pluses – location, driveway, yard, space, charm – that I’m not convinced an updated kitchen would add to the value all that much.  We did the wrong thing in terms of real estate in that we bought the most expensive home on the block.  In our case, sinking money into a kitchen upgrades would literally be sinking money.

Second, we don’t plan to move any time soon.  Therefore even if the home did come up in value commensurate with a kitchen renovation… it doesn’t matter.  Bottom line, it would be dollars out of our pocket.

Third, it would be crazy to spend tens of thousands of dollars on home renovations while we still have a mortgage.  Financing a renovation is out of the question.  We believe that decreasing the equity in our home is a bad idea.  Therefore we pay for any home upgrades with cash.  It just doesn’t make sense to use our emergency cash fund for a non-essential, luxury upgrade.

So where does that leave us?

It leaves us in an awesome house with a dated kitchen.  So what? The kitchen is clean.  I got a little rolling island to add to the counter space.  And importantly, the food I cook in our dated little kitchen tastes the exact same as if it was prepared on a granite or marble or corian countertop and cooked on a stainless steel 6 burner with red knobs.

There will always be a way – several ways – to spend lots more money in the kitchen.  There will always be nicer knives to buy, cooler pans, a more beautiful countertop, a fancier this or that.

  • Got a cool $4,894 burning a hole in your pocket?  You can now buy a fridge from Samsung with interior cameras and a digital display that connects with your smartphone.  You can see your food while avoiding the “hassle” of opening your fridge door.  That’s absurd.
  • Kitchen all tricked out with the latest?  Well now you need two!  Two ovens (and a warming drawer!).  Two dishwashers.  Two (or three) sinks.  Two islands, even- “kitchen with two islands” populates on google search!
  • Already have double everything?  What about restaurant-grade appliances? A deep fryer, an Italian espresso machine, a wine fridge, a pizza oven…
  • Have all that?  Well what about an outdoor kitchen?  Sure, you already have a grill, but a grill is just a small component of a tricked out outdoor kitchen.  Don’t worry, HGTV can help you if you need ideas.

The point is that a kitchen – like a car – will only be the latest and greatest for a moment.  The next moment, a new thing or trend will emerge that makes your perfect kitchen seem lacking.  I sat next to a kitchen designer on a plane in April and she told me she’s done a $250,000 kitchen renovation!

I’m not anti-kitchen updates.  I spend a ton of time in my kitchen, and theoretically, sure, I’d love it to be updated.  But kitchen updates need to make sense.  All updates should be done with cash.  Big updates should be undertaken by people without debt.

I’m constantly surprised by the friends and coworkers who classify financed kitchen upgrades as “needs.”  It’s difficult to stick with a budget when we’re constantly barraged by so many convincing voices telling us that we need beautiful things, and we deserve the best of the best.  It’s so hard to keep the Big Picture in mind!  But the Big Picture is: no house is perfect.  Don’t sacrifice a trajectory to financial independence by trying to spend your way to perfection in a house.  Decide what elements of a home are most important.  Size, location, kitchen?  Be prepared to make trade-offs.  Don’t go broke chasing perfection.  Find contentment.  And remember, food tastes just as good when it’s made on white appliances 🙂

 

The HSA

High deductible insurance.  Yuck.  We’ve had high deductible insurance for the past 3 years, and it’s been so stressful.  We have to spend $2700 out of pocket before the insurance actually kicks in, and even at that point, we still pay 20% of all costs until we hit some stupid-high annual “out of pocket max.”

Last year, I started to wise up.  I put $1500 into the HSA but blew through it and still ended up with another $1100 coming out of my pocket, post-tax.

This year, we were quickly approaching our $2700 out-of-pocket max with only $1500 earmarked for the HSA when I finally fully woke up.  I changed my withholding for 3 paychecks and fully funded the account.

The HSA (health savings account) is the FSA (flexible spending account) of the high deductible insurance world.  The stressful part of the FSA — use it, or lose it — is removed from the HSA.  All money rolls over to the next year, then the next and the next.  HSAs are only available to high deductible plan holders.

2016 HSA limits: $3,350 for individuals, $6,750 for families.

The money is “triple tax advantaged” – it goes into the HSA pre-tax (it lowers your taxable income), it grows tax free, and it comes out tax free when it is used to cover medical expenses. You’ll also save on FICA taxes when it goes in. “Worst case scenario,” you are healthy, and take it out without penalty at age 65 as if it was an IRA.

Some folks like to take the tact of using the HSA as a second IRA from the beginning.  They fully fund the account and pay for deductible out of pocket. Here’s a link to a list of HSA-allowable expenses.

Not us.  We’re on a rather tight budget in our household.  A $400 bill for blood work or whatever other nonsense is difficult to absorb into our week-to-week operating budget.  We use our HSA money to pay for bills as they come in.  I particularly like that it lowers our taxable income.

Two side comments:  one effect of high deductible insurance plans is that it makes you hesitate to call the doctor.  The second effect is that you start to hate doctors, fast.  All they seem to do is order tests and bill, bill, bill.

Update, 10/7/16- we’re grateful for putting aside the money pre-tax this year for the HSA, but holy smoke is this health insurance stuff eating us alive.  We are healthy people with minor problems!  $4,713 out of pocket so far this year, NOT including the bi-weekly paycheck deductions for the plan itself.  We have another round of big bills coming our way.  At this point we’ve hit the deductible for the year, but not our “out of pocket max,” so we will continue to pay 20% of the negotiated insurance rates until we hit the “out of pocket max.” 

$4,713 for out of pocket medical expenses through October 7, NOT including bi-weekly paycheck premiums.  I miss the old system.
$4,713 for out of pocket medical expenses through October 7, NOT including bi-weekly paycheck premiums. I miss the old system.