We have covered the basics of what type of loan to get, what to look for in a house, why you need a home inspection, etc. You followed our advice and now you bought your house. Excellent! Now come the repairs, the scheduled maintenance, the unexpected fixes, and creating memories galore! How do you work your budget to allow for these things? What should you prepare for in a house budget? Here are some tips in planning for the unexpected as well as accounting for regular needs and future repairs.
- Set aside an emergency fund. Any financial planner and guru will tell you set aside at least 3 months’ reserve of your living expenses. This doesn’t get touched unless an emergency comes up, i.e. losing your job, medical emergency, house burns down, etc. Work towards this first.
- Set aside one percent of your home’s purchase price per year. Rule of thumb is to set aside one percent of your home’s purchase price. So if you bought a $300,000 home, then set aside $3,000 a year for continued maintenance. If you have an older home, you might need to budget more as you may have bigger ticket items like a roof to replace.
- Plan ahead, get quotes. If you know your roof is will need replaced in the next five years, get a quote and start saving towards that cost. Granted, the cost may go up when you finally hire the roofers, but the majority of the cost will be covered. Same goes for appliances or heating and cooling units. There may be tax rebates on replacing the old heating units and replacing them with new energy efficient models. In our area, Alliant Energy will do a home energy assessment to see if you qualify for any energy efficiency rebates. This can save you money in updating your energy needs as well as save you money in the long run.
- Plan an extra amount per damage factor. Damage factors include age of the home, weather, current home condition, location and type of home. If you own a 20-year-old home, live in tornado alley and are in a flood plain, add an extra 30 percent a month to your budget for maintenance and repairs. If you bought a $300,000 home set aside that initial 10 percent per factor, so in this case an extra 30 percent per year.
- Put in some elbow grease. If you are needing an immediate repair or even regular maintenance the more you can do yourself the more money you will save. That’s not to say if you have no experience rewiring a house, hire a professional! You’ll spend more in fixing a botched job than you will just paying the professional to do it.
These are just the basics and may not apply to your specific home. Buying a home is much more than the closing costs and home owners insurance. It takes a lot more to keep your home maintained and up-to-date! Maintenance needs to be done every year, but the updating can wait until you have the money saved and the time to do it. Be cautious of taking out a loan or getting more credit to fund your updates or major repairs. More debt doesn’t always equal more freedom or better financial gains.
How did you set up your budget? What are some of your yearly maintenance needs? Tell us in the comments below!