Frugaling

Save more, live well, give generously

  • Home
  • Start Here
  • Popular
    • Archives
  • Recommended
  • Contact
  • Save Money
    • Lifestyle Downgrade
    • Save Money with Mindfulness
    • Save at Starbucks
    • Psychological Trick To Reduce Your Online Shopping
    • Best Freebies
  • Minimalism
    • 8 TED Talks To Become A Minimalist
    • We Rent This Life
    • Everything Must Go
    • Lifestyle Downgrade
    • The Purchase Paradox: Wanting, Until You Own It
    • Nothing In My Pockets
  • Social Justice
    • Destroy The 40-Hour Workweek
    • Too Poor To Protest: Income Inequality
    • The New Rich: How $250k A Year Became Middle Class
    • Hunter Gatherers vs. 21st Century Desk-sitters
  • Make Money
    • Make $10k in 10 Months
    • Monetize Your Blog
    • Side Hustle for Serious Cash
  • Loans
    • 5 Rules To Follow Before Accepting Student Loans
    • Would You Marry Me?
    • Should I Have a Credit Card If I’m In Debt?
    • $50k in Scholarships in 70 Minutes

Account For Depreciation, Save Your Budget

By Frugaling 7 Comments

Share This:

Broken Computer Flickr Creative Commons Tech Devices
Photo: flickr/youngthousands

The 21st century doesn’t seem to prevent technology from aging rapidly and becoming obsolete after a couple years. A couple of my devices recently died, and I’m on the cusp of another big tech failure. I just don’t have the money to replace anything. This could spell trouble for my precariously balanced budget.

My devices are failing me

Three months ago, my Amazon Kindle broke. I traveled the globe with that device and read hundreds of books over its lifespan. After four years of heavy use, the screen died and the internal motherboard stopped working properly. It probably didn’t help that I spilled a glass of orange juice in the keyboard of this device (watch out for this theme). Rather than simply throw it away, I auctioned it off on eBay and recouped about $25. Not bad considering it was broken and about four years old.

Amazon’s Kindle costs about $120.

I just chucked my Apple headphones in the trash. After nearly two years of intense use and travel, they’re broken. I don’t go a day without listening to music on my iPhone, and most of the time I used those headphones. I had tried extending the life by using electrical tape and trying to reseal certain areas on the headphones. For a while, that worked. Unfortunately, they worsened. They’ve been answering/ending phone calls automatically and starting/stopping music at random. Not a pleasant surprise when you begin answering phone calls to telemarketers.

Apple’s in-ear “earpods” cost about $30.

What if my computer breaks?

I bought my 13″ Macbook Air in mid 2011. It’s my favorite computer I’ve ever owned, and I’ve avoided an upgrade. While I still yearn for a newer model, I can’t afford to buy one right now.

Like my other devices, it gets exposed to some serious travel and abuse. After about a year of owning the laptop, I spilled a full glass of chocolate silk in the keyboard (notice the theme?). It fried the top assembly. I brought it to a repair store to try and save it — the cost was about $400 to fix. I remember looking at that price and thinking, “I could buy a brand new Windows laptop at that cost.” I decided to go ahead with the repair, as the system could be saved.

Now, about three years old, my trusty laptop is starting to slow down. I can tell that the cooling fans aren’t working properly. This is likely damaging important processor components and could threaten my data. It’s a recipe for disaster. At some point, my laptop will likely overheat and fry itself. Until then, I work on nearly everything in the cloud and save frequently.

Apple’s Macbook Air costs about $1000.

Account for losses, use depreciation schedules

When you purchase a computer, like a new car, it immediately loses a bit of value. Over time, the depreciation continues. The Internal Revenue Service (IRS) has specific tax depreciation rules that can be used for the following:

Most types of tangible property (except, land), such as buildings, machinery, vehicles, furniture, and equipment are depreciable. Likewise, certain intangible property, such as patents, copyrights, and computer software is depreciable.

These properties can be deducted from income schedules, but are only to be used by businesses. You cannot deduct for physical product depreciation as an individual. Luckily for me, my computer is primarily a business tool — seeing as I use it to write.

Modified Accelerated Cost Recovery System MACRS
Screenshot of a Modified Accelerated Cost Recovery System calculator

Irrespective of whether you can claim a tax deduction, it’s important to learn to account for depreciation in vehicles, electronics, and intangibles (i.e., software). But this is where calculations get sort of complicated. Essentially, depreciation is a governmental science that averages your losses on a product, which is based on your cost basis (the original price paid). If I bought my computer in 2011 for $1000, then the depreciation expense that can be deducted from my taxes is $58. That’s a loose estimate from this calculator.

Even if you don’t claim business tax deductions, calculating depreciation through this method and then including the $58 loss in your budget for 2014 is very important. If I had properly accounted for the further losses of my headphones, the Kindle, and my Macbook Air, I would be in a better financial situation.

Eventually, things fall apart. It’s a known truth. After losing my Kindle and headphones to failure, I looked at about $125 in losses. If my computer goes, too, I’m in trouble. In the future, I’ll be looking to account for depreciation to avoid budgetary surprises that could leave me reeling.

Also, I’ve learned that I need to keep liquids away from keyboards.

Share the wealth:

  • Click to share on Facebook (Opens in new window)
  • Click to share on Twitter (Opens in new window)
  • Click to share on Pinterest (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)
  • Click to share on Reddit (Opens in new window)
  • More
  • Click to share on Pocket (Opens in new window)
  • Click to share on Tumblr (Opens in new window)

Related

Filed Under: Save Money Tagged With: Amazon, Apple, Budget, Depreciation, Devices, Earpods, Headphones, irs, kindle, Macbook Air, Tech, Technology

Comments

  1. MMD says

    May 19, 2014 at 11:27 am

    This is where an emergency fund comes into play. Forget a few hundred for electronics. Every time something goes wrong on my car, I end up with four-figure expenses I wasn’t really planning on spending!

    Reply
  2. Dee @ Color Me Frugal says

    May 19, 2014 at 11:42 am

    We always try to think of this in terms of the big picture: we want to spend our money on things that increase in value (like rental properties) rather than things that decrease in value. It keeps us motivated to keep the purchase of “stuff” to a minimum!

    Reply
    • Sam Lustgarten says

      May 20, 2014 at 7:51 am

      Dee,

      You’re right! This is the total minimalist argument. 🙂

      Thanks for your comment,
      Sam

      Reply
  3. E.M. says

    May 19, 2014 at 12:12 pm

    I’m sorry everything happened to go wrong in such a short time frame! Failing technology can be a pain. I purchased a refurbished Macbook Air for a total of $850, and if I get around 5 years out of it, I’ll be elated. I try to be careful with my technology purchases and buy reliable brands, but anything can happen. I did drop my other laptop on more than one occasion, causing the headphone jack to break. I make sure to handle everything with care now.

    Reply
    • Sam Lustgarten says

      May 20, 2014 at 7:50 am

      E.M.,

      Thanks for sharing your experience with computers. Yeah, it’s hard for me to “handle with care” as I’m always on the go. The best thing I can do is move drinks further away from the keyboard! 😉

      Smart move getting a refurbished Mac. That definitely saves you so money and reduces the depreciation value. Ultimately, you could resell it for the same amount that I can.

      Well done!
      Sam

      Reply
  4. Jen @Sprout Wealth says

    May 19, 2014 at 7:52 pm

    I worry about my desktop giving up on me eventually but I know it is bound to happen. I just hope not soon because my budget cannot afford a replacement yet. That goes to show I can so relate to your post but reading it made me realize I need – no, I must – have a desktop replacement emergency fund ASAP!

    Reply
  5. DivHut says

    May 22, 2014 at 2:03 am

    Never buy tech new. It’s like buying a new car. It’s an asset that depreciates rather quickly and/or becomes obsolete after a few years. I just wrote an article abut how I bought a used laptop on eBay ( not the latest model) slapped on a free OS (Lubuntu) and could not be happier. Linux is one way you can save hundreds on instead of going with Windows or Mac software.

    Reply

Join the Conversation: Cancel reply

Follow

  • Facebook
  • Google+
  • Pinterest
  • RSS
  • Twitter

Subscribe

Best Of

  • The New Rich: How $250k A Year Became Middle Class
    The New Rich: How $250k A Year Became Middle Class
  • 5 Tricks To Save Money At Starbucks (Updated)
    5 Tricks To Save Money At Starbucks (Updated)
  • Destroy The 40-Hour Workweek
    Destroy The 40-Hour Workweek
  • 8 TED Talks That Will Inspire You To Become A Minimalist
    8 TED Talks That Will Inspire You To Become A Minimalist
  • What Are The Best Sites For Freebies?
    What Are The Best Sites For Freebies?
  • Who's Responsible For Poverty?
    Who's Responsible For Poverty?

Recent Posts

  • How To Find A Reliable Service Provider For Currency Exchange
  • First-Time Landlord: Know Your Rights to Protect Yourself from Bad Tenants
  • Increase Your Revenue Simply by Being a Great Manager
  • How to Earn Extra Income During the Lockdown
  • 4 Ways That Residential Replacement Windows Will Help

Search

Archives

  • January 2021 (2)
  • December 2020 (2)
  • October 2020 (2)
  • September 2020 (1)
  • August 2020 (3)
  • June 2020 (1)
  • May 2020 (2)
  • April 2020 (1)
  • February 2020 (2)
  • January 2020 (1)
  • December 2019 (1)
  • November 2019 (5)
  • September 2019 (4)
  • August 2019 (1)
  • June 2019 (1)
  • May 2019 (1)
  • April 2019 (1)
  • March 2019 (3)
  • February 2019 (1)
  • January 2019 (3)
  • December 2018 (1)
  • September 2018 (2)
  • July 2018 (1)
  • June 2018 (2)
  • May 2018 (1)
  • April 2018 (5)
  • March 2018 (6)
  • February 2018 (4)
  • January 2018 (1)
  • December 2017 (10)
  • November 2017 (3)
  • July 2017 (2)
  • June 2017 (5)
  • May 2017 (2)
  • April 2017 (8)
  • March 2017 (4)
  • February 2017 (3)
  • January 2017 (2)
  • December 2016 (2)
  • November 2016 (4)
  • October 2016 (2)
  • September 2016 (1)
  • August 2016 (4)
  • July 2016 (1)
  • June 2016 (3)
  • May 2016 (3)
  • April 2016 (4)
  • March 2016 (5)
  • February 2016 (2)
  • January 2016 (2)
  • December 2015 (3)
  • November 2015 (5)
  • October 2015 (5)
  • September 2015 (4)
  • August 2015 (6)
  • July 2015 (8)
  • June 2015 (6)
  • May 2015 (14)
  • April 2015 (14)
  • March 2015 (13)
  • February 2015 (12)
  • January 2015 (15)
  • December 2014 (10)
  • November 2014 (5)
  • October 2014 (6)
  • September 2014 (7)
  • August 2014 (12)
  • July 2014 (11)
  • June 2014 (12)
  • May 2014 (16)
  • April 2014 (13)
  • March 2014 (13)
  • February 2014 (9)
  • January 2014 (20)
  • December 2013 (9)
  • November 2013 (18)
  • October 2013 (15)
  • September 2013 (11)
  • August 2013 (11)
  • July 2013 (27)
  • June 2013 (18)
  • May 2013 (16)

Best Of

  • The New Rich: How $250k A Year Became Middle Class
  • 5 Tricks To Save Money At Starbucks (Updated)
  • Destroy The 40-Hour Workweek

Recent Posts

  • How To Find A Reliable Service Provider For Currency Exchange
  • First-Time Landlord: Know Your Rights to Protect Yourself from Bad Tenants
  • Increase Your Revenue Simply by Being a Great Manager

Follow

  • Facebook
  • Google+
  • RSS
  • Twitter

Copyright © 2021 · Modern Studio Pro Theme on Genesis Framework · WordPress · Log in