Thriving Millionaires

By Eric

As a homeowner, the old adage holds true: “It’s always something”.

Within the last few months, my wife and I have had issues with our master shower, one of the toilets in the house, our furnace, and our dishwasher.

The master shower head was leaking, which had caused some issues with the grout in the shower. The cartridge in the shower handle had a bad gasket (I never even knew this was a thing), and the grout needed to be removed and replaced. As soon as I knew we had an issue, the first thing I did was Google the cost to have this repair done. According to HomeAdvisor, the average homeowner spent $305 to hire a plumber to fix something around the house. Assuming this doesn’t include parts, this repair would have cost us $350 before we even began the conversation about removing and replacing the grout. Repairing tile and grout for a similar project would run about $415 according to the same source. All said, this leak would have cost us approximately $750.

Instead of paying to have this fixed, my wife and I spent some time watching DIY YouTube videos, talking with neighbors who had recently tackled similar projects themselves, and making a few trips to Home Depot. With a little elbow grease and time invested on weekends, we completed this $750 repair for about $100 and learned a lot in the process! The $650 in savings felt great, but honestly, doing the work ourselves and learning about plumbing and re-grouting was just as fulfilling to us!

Similarly with the toilet that wasn’t working properly, the average cost to have a toilet repaired in our area was $220. A few YouTube videos, a Saturday afternoon, and 3 (yes, 3…) trips to Home Depot later, I completed the project for $60 – and that counts the cost of buying the wrong parts a few times, but not being able to return them because I had opened and used them before I knew they were wrong.

The furnace we hired out. Despite my general handiness, that wasn’t a job I was willing to tackle myself. Turns out, the part was pretty simple to replace and, assuming I could have diagnosed the problem myself, I probably could have fixed. Nonetheless, we spent $330 on this repair from a local company – but the heat came back on, so I consider that money well spent. Had I done it myself, I probably could have completed the work for $70, thus I left $260 of savings on the table my hiring it out. Of course, there is always the idea that I could have done more harm than good and ended up hiring it out after I did more damage making the repair crew’s work harder and the bill higher. I guess we’ll never know about that one.

And the dishwasher? A few articles on dishwasher error codes and common causes allowed me to fix that Monday before heading to work while waiting for the coffee to brew. That 5 minutes likely saved us $170, the average cost for an appliance repair.

Why do I take the time to explain these examples? To illustrate my point: There is tremendous value in fixing things yourself. If you are handy, or aspire to be, investing some time in education on the system and the repairs needed can pay dividends in the form of savings for home repairs.

If you tally up the above examples, I spent a total of $490 on these repairs. If I had hired them all out, assuming the average costs from HomeAdvisor, I would have spent $1,470. I’m happy to call a 67% savings rate a success in approximately a six month time period.

Now hopefully – knock on wood – we don’t have a similar amount of repairs needed in the next 6 months. But, as I started this post by saying, “It’s always something”. So, if we annualize the numbers from the last 6 months, we’ll need to plan to spend ~$3,000 on home repairs if we hire it out or ~$1,000 if we have a similar mix of fixing it ourselves vs hiring out the work.

Not only can we assume that doing some repairs ourselves will yield $2,000 in savings per year – but we will now have $2,000 that we can put to work for us. Because the savings comes directly from home repair savings, we are most likely going to invest that $2,000 against the principle of our mortgage. I’m not going to get into the “Extra Mortgage Payment vs Invest” argument in this post, but I do want to illustrate the power of applying the savings to our mortgage. While the below example isn’t exactly our situation, it’s a simple example to walk through:

Let’s assume you have $250,000 remaining on your 30-year mortgage at 4.0% interest.

If you don’t make any extra payments towards your principle, you will pay off the loan in Year 30 at a total cost of $430,000 – or about $180,000 in interest.

If we take the $2,000 per year in home repair savings and make equal monthly payments towards the principle – we will pay an extra $167 per month towards the balance of the loan. This small reallocation of budget dollars (with a little hard work mixed in), shortens the loan from 30 years to only 24 years and saves nearly $42,000 in interest expense over the life of the mortgage. Not only that, but in years 25-30, we have the additional cash flow available to us rather than having to send a check to the bank each month.

Some people will try to tell you that it isn’t worth your time to fix things. Just hire it out and leave it to the experts. For me, $42,000 in interest savings and 5 years of not having to make mortgage payments is a pretty good reward. To do the math, this annualized example has us saving $2,000 per year for 30 years (total savings of $60,000) plus the $42,000 savings in interest for a grand total of $102,000. While I didn’t track our time on the repairs, if I had to guess, I would say it would be in the neighborhood of 30 hours annualized. Across the 30 years in this calculation, we would invest 900 hours in our home repairs.

Simple division will tell you that we are saving $113 per hour of time spent on home repairs. Not a bad rate if you ask me!

All of that said, if you don’t feel comfortable or confident in starting a project, don’t let this post pressure you into doing any repairs you aren’t equipped to handle. I have a list of projects I won’t touch and I know I will always hire simply because I am not able to try them or feel they are too risky.

That’s ok. The key isn’t to tackle every job that exists in your home yourself, but to at least start the thought process differently. Don’t immediately grab the Yellow Pages (or Google) – think about whether or not it is something you may want to attempt yourself. Watch some videos, read some DIY guides. If you don’t think you are the right person for the job, call someone else. But don’t blindly ask for help before you vet the project yourself. You may be giving up $113 per hour when you place that phone call.

Patrick’s Thoughts:

As someone who does a lot of home repairs myself, I understand the tremendous value of a little elbow grease. The numbers in Eric’s examples above are astounding! On top of the financial benefits, learning how to do practical things can be both entertaining and rewarding. I’ve got countless examples of feeling like I’m on top of the world after finishing a difficult project. The sense of accomplishment by doing something yourself is special.

With that being said, the most important point Eric makes above comes from this quote:

“If you don’t feel comfortable or confident in starting a project, don’t let this post pressure you into doing any repairs you aren’t equipped to handle.”

This is a critical point. We all have different skills sets, and projects will vary based on your home’s age, condition, and a variety of other factors. Taking on something yourself could lead to additional costs, or even worse, a major home disaster down the road. Imagine if you installed a sump pump incorrectly? Your basement or crawlspace could flood. Put in some faulty electric wiring? I don’t even want to discuss the consequences of that. There are some things you should pay a professional to do if you feel you don’t have the skill sets to do it.

I’ll leave you with three questions I ask myself to determine if I should do a project myself:

1. Do I have the time to do it?

This question can really be broken down in to two parts. The first is, “do I have a good understanding of the time it will take to complete this project?” Once you know that, then you can determine if you have the time in your schedule to complete it. I always add about 50% of the time I think it will take to get a realistic feel for how long it will actually take.

Let me give you an example. A few months back, I decided to add a backup sump-pump to my crawlspace. After watching some videos, I figured I could get the project done one evening after work. Three hours later, I realized I was going to need several other components to finish the job. It just wasn’t as simple as I had laid it out to be. I went to Home Depot that Saturday and was able to wrap up the project two hours later. Thankfully, I had that Saturday free, but if I hadn’t, I could have had an inactive Sump Pump during a storm we got a few days later.

       2. Do I have the skills to do it?

There can be significant sticker shock when you look at the prices some professionals charge for certain home projects. There is a very good reason for this, and it should not be taken lightly. When my wife and I first moved in to our house, I wanted to replace all the electrical switches with modern looking ones. The quote I got to do this was astronomical. Thankfully, my father was an electrician at one point in his life and had showed me the ropes several times before. I ended up doing the work myself because I felt comfortable doing it. Most people won’t be in this situation and I would advise against it. You know your skills best, and stick to things you can do!

        3. What’s the benefit of doing it?

It’s important to weigh the pros and cons of taking on a project yourself. You not only have the financial implications to look at, but you need to determine if a project will take you away from something important in life. My wife is expecting a child in August, and I anticipate my appetite for doing home repairs will decrease during this time. Finances aside, the importance of spending quality time with your family cannot be understated. I may still tackle small things here and there, but some of the bigger executions I may leave to the professionals.

Either way you slice it, it’s going to come down to how you feel about your time, your skills, and the benefits you would receive from taking on a project yourself. While we all won’t end up in the same place, it’s important to evaluate how a little bit of elbow grease can really lube up the pistons powering a strong financial future.