Being a homeowner is an exciting responsibility that many people dream of their entire lives. It’s also, however, a very expensive responsibility. Many homeowners don’t realize quite how expensive it is until they get their first bill for maintenance of some sort. Luckily, you can plan for these expenses and set up funds for when a home maintenance disaster strikes or for when it’s simply time for routine maintenance. Let’s take a look at what you need to know and consider when budgeting for home maintenance.
How Can Having a Maintenance Fund Help You?
Although many people may realize that setting aside money for a home maintenance fund is a sound and logical financial decision, they may have trouble sacrificing money to the fund that they could use for other expenses. That’s why it’s important to understand just how the fund can benefit you in the future. With this understanding, you’ll be more motivated to create the maintenance fund.
By budgeting for home maintenance, you ensure that you have enough money for any issue that arises. You won’t have to deal with a toilet that doesn’t flush or a leaky roof if you have the money to fix it right away. Having a home maintenance fund ready for you to use in emergencies is like knowing a trustworthy bail bond agency, which pledges money or property as bail for the appearance of a defendant in court, you can call if you ever get arrested. You can eliminate stress and worry by having a fund that’s ready to ease the financial burden of home repairs.
How Much Should You Budget for Home Maintenance?
Every homeowner will set aside a different amount each month for their home repair fund, depending on their income and other financial responsibilities. However, there are a couple of general rules that can help you determine how much you should budget.
One of these rules is the one percent rule. If you follow this, you’ll set aside at least one percent of your home’s value every year for home maintenance. This means that if your house is valued at $360,000, you’d set aside $3,600 per year or $300 per month. Another rule is to save 10% of the total cost of your property taxes, insurance payments, and mortgage. That means that if you pay a combined total of $2,000 per month for those expenses, you would set aside $200 for home maintenance and repairs each month.
Of course, not every homeowner may be able to reasonably afford to budget according to these percentage rules. When it comes down to it, any amount that you can spare each month for your home maintenance fund is worthwhile to set aside. If you tend to have $50 or $100 extra at the end of each month, put that in the fund. If you know that you have a major maintenance expense coming up such as replacing the furnace, which lasts for about 15 to 20 years, then make the effort to budget even more for the repair fund. You should also consider budgeting more for home maintenance if your home is older, as unexpected repairs can easily crop up.
Where Should You Set Up This Fund?
In general, the best option for saving money for home repairs and maintenance is in a savings vehicle that is relatively liquid. This is because you’re probably going to need to be able to access the money quickly and easily when something happens to your home. You don’t want to tie up the fund in long-term bonds just so that you earn a bit in interest. Think of the fund as an aboveground storage tank, the number one purpose of which is to store oil prior to distribution. The number one purpose of your fund is to have money set aside for emergency repairs or maintenance, not to earn more money from your savings.
Simply try to find an FDIC-insured bank account that pays the best rate of interest possible. There are many high-interest online savings accounts with FDIC-insured banks. You’ll be able to earn interest on your funds while they’re tucked safely away in the account and your account will be insured up to the maximum amount the law allows if the bank fails. Having the fund online also allows you to easily withdraw the money when an emergency pops up or it’s time to pay for a major expense. Just be sure to keep this savings account separate from your main savings account so that you aren’t tempted to dip into it for expenses that aren’t related to home maintenance.
The price of unexpected home repairs can affect your financial stability for years to come if you aren’t prepared. By developing a plan for budgeting for home maintenance and sticking to that plan, you can enjoy your home without worrying about how you’ll pay for unexpected expenses.