Whether it’s a brand new home or not, you need to consider more than the mortgage payment when allocating money to your housing budget. Every home will eventually need repairs, and it can take a huge bite out of your monthly income if you don’t plan accordingly. The key is to save up for those expenses before they’re even needed.
Real Life Example
John was shocked when he took a step back and realized just how expensive home updates could be. Over the last year, the following costs gobbled up his emergency savings:
The total comes to $3,600 or $300 a month. John mentioned that he hadn’t really accounted for any of it, and he has since learned his lesson. Now, his Money Coach is helping him make sense of the mess and plan ahead, so he doesn’t find himself in the same situation.
Don’t learn the hard way! Start by taking inventory around your home, come up with your own list, and tally up the projected costs. For some extra peace of mind, add a little wiggle room: John totaled the amount he should start saving then increased it by 10% to play it safe.
Here are the step-by-step instructions to get you started…
Step #1: Create a List of Eventual Repairs and Replacements
You should create a check list of big ticket items that will impact your budget when the time comes to replace or repair them. Some examples are…
Step #2: Estimate the Cost and Life Expectancy
Estimate how long the current appliance will last and how much it will cost to replace or repair the appliance. Next, take the projected cost of the new appliance and divide it by the life expectancy of your current appliance. This exercise will give you a good idea of how much money you need to save and how much time you have to save it.
Take the dishwasher for example. The average life expectancy for a dishwasher is nine years, and buying a new dishwasher can cost anywhere from a couple hundred dollars to well over a thousand! If you exclude any maintenance costs for the current dishwasher and just focus on saving for a shiny new one (say it costs $1,000), you’ll need to save around $112 annually for nine years.
Saving $112 each year sounds a whole lot better than having to sacrifice $1,000 from your monthly paycheck because your dishwasher crashed and you didn’t plan accordingly.
Step #3: Start Saving
Make saving for house repairs and replacements a part of your budget. Think of it as a bill you need to pay each month or each year. If you need help finding room in your budget for this kind of savings goal, talk with your Money Coach about how to rearrange your finances for better success. Call 888-724-2326 to get started.
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