Experts estimate that the average yearly home repairs cost $1,700. That’s a large chunk of money to not have a plan for. If you are a homeowner and you haven’t budgeted for this amount in your spending and savings plan, now is the time to get prepared before any nasty surprises derail you. Here are some thoughts to get you started on the process.
Why it’s a good idea
Even new homes are going to need repairs; things just have a way of popping up. Try not to fall into the trap of thinking you won’t need money for repairs or maintenance for a while because your home seems fine now. That can really come back to hurt you if you later need to take out costly loans or put repair bills on a credit card.
Also remember that performing routine maintenance now can actually save you a lot of money since it can help you to avoid the huge problems that neglected maintenance can lead to down the road.
Plus, making upgrades to your home can help increase the value of your home, which will be crucial when you want to sell the home or take equity out later.
How to estimate your upcoming needs
A common shorthand way of figuring home repair needs is to put at least 1% of your home’s value each year toward repairs and maintenance. For example, if your home is worth $150,000, you should try to put $1,500 year, or $125 per month, into savings for home upkeep.
Areas to give special attention
The 1% Rule is a handy guideline, but if your home has a problem with its roof, water drainage, heating/cooling or foundation, you should be putting 3-4 times more money into savings to deal with it.
What you can do right now
If you’ve already done a spending and savings plan, it’s not necessary to complete an entirely new one for these types of expenses. Just examine your current budget and see where some money can be moved around to give you some added security. If you can’t meet the monthly goal right away, don’t fret. Putting even a small amount each month toward eventual fixes is far superior to saving nothing.
It’s a good idea to create a separate savings account for home repairs. You may want to include this money in your general emergency savings account, but keep in mind that you may have multiple problems come up within a short amount of time. Best to have yourself covered for all eventualities.