Owning a home is still very much part of the American Dream. But it’s one that comes with a cost. Not only are housing prices on the rise across the US, but the hidden costs of owning property can often be more than many expect.
For example, over 98% of all homes with basements experience some type of water damage. You can theoretically prepare by making adjustments to your home (or responding to flooding quickly — the importance of which those who live in the 21 million US households with septic systems know well), of course. Prioritizing preventative maintenance can also help you save money in the long run. Even though properly ventilated roofs are supposed to last 20 years or more, having inspections performed twice a year can increase the longevity of these systems and prevent the need for emergency replacement.
Ultimately, you can’t always predict when disaster will strike. If you live in an older home or simply get caught off-guard by a structural or electrical failure, you might panic about the price of repairs. But following the tips below can help you budget properly so that you have enough set aside for an urgent event.
Keep Conventional Wisdom In Mind
There are a number of budgeting “rules” that you can follow in order to save enough for home repairs. Some experts recommend the “1% Rule,” which says you should set aside 1% of your home’s purchase price to cover annual home expenses. For a $300,000 home, in theory, you should budget $3,000 per year for repairs. You can also follow the “50/30/20 Rule,” which says you should put 50% of your income toward necessities, 30% to “wants,” and 20% to savings an debt; it’s the 20% that can be used for repairs, though that may be difficult to achieve if you have student loans or medical bills to pay for. In addition, there’s the “Square Foot Rule,” which involves saving $1 per every square foot of your home for necessary maintenance and repairs.
Really, these rules act as a mere starting point. On their own, they aren’t foolproof. If you got your home for a steal or were smart enough to buy in an up-and-coming neighborhood, the calculations may be off. Older homes typically require more maintenance, so those who don’t buy new builds should be aware that they may need to set more aside for upgrades. The Balance recommends averaging the 1% and square-foot rules before adding 10% for every factor that might make your home more likely to need repairs. There are plenty of budgeting calculators you can use for your specific circumstances, as well.
See About Getting a Home Warranty
Many purchases you make may come with (or may have the option to add) a warranty. But did you know you can actually obtain a home warranty to cover many of your appliances and essential systems? While homeowners’ insurance can pay for damages related to unexpected events, it won’t do you much good if you experience a run-of-the-mill breakdown. Home warranties, in contrast, can cover your major appliances and systems like HVAC, electricity, and plumbing. Your home warranty can actually kick in once the manufacturer’s warranty has run out, which could potentially save you thousands if you have an unexpected repair. While not all situations are covered under a home warranty, it can be a good way to save money. Home warranties will typically cost a few hundred dollars a year — but this could be a small price to pay in many situations.
Automatically Add to Your Account
Now that you know how much you should ideally be saving on home repairs, you might be wondering about some ways to make it easier. You can, of course, cut back on non-essential spending or take on a side hustle to add to your income. But short of remembering to deposit money into your emergency savings account each month, how can you make budgeting for home repairs easier? Make the contributions automatic. There are a number of budgeting apps on the market — like Chime, Digit, Acorns, and more — that will round transactions up to the nearest dollar and deposit the difference into your savings account. You can also set up automatic transfers each month to ensure you know how much money you really have available and to take the guesswork out of saving for a rainy day (or flood). When saving money is mindless, you won’t need to worry as much about what could have been. If and when an urgent situation strikes, you’ll have the available funds needed.
Budgeting isn’t simple for anyone — especially during an economically difficult time. But if you approach your home-related saving with these tips, you can gain peace of mind and ensure you’ll have enough set aside.
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