A commonly cited rule of thumb is to save between 1% and 4% of your home’s value each year for maintenance expenses. While this can provide a good starting point, there are many other factors that should be taken into consideration.
Some of the most important factors include: your home’s age and condition, your location and climate, and whether you can DIY versus hire professionals.
- Create a Maintenance Budget
Creating a maintenance budget is one of the first steps toward proactively maintaining your home. Knowing your annual home maintenance costs can help you make wise decisions about preventive and reactive maintenance, which may save thousands in costly repairs down the line.
The easiest way to determine your home maintenance costs is by using historical data. By analyzing historical data pertaining to the failure rates and life cycles of your assets, you can estimate future costs.
It’s also important to factor in the cost of smaller projects, such as replacing light bulbs or repairing small holes in the wall. These can add up quickly if you don’t have funds set aside for them. By incorporating these monthly small projects into your budget, you can save for them over time and avoid unexpected expenses. Ultimately, this will keep you from putting expensive home repairs on credit cards or dipping into savings accounts for other needs.
- Set Up a Savings Account
Whether you’re a new homeowner or an old pro, it is never too late to start putting away money for the cost of home repairs and maintenance. Creating a savings account with the sole purpose of keeping funds for these expenses can help you avoid the stress and debt that can come with unexpected costs.
To determine how much to save, consider how much you paid for your home and what the average yearly cost of your maintenance expenses is in your area. Some experts suggest that homeowners set aside between 1 to 4 percent of their home’s value each year.
Another option is the square foot rule, which recommends saving a dollar for each square foot of your home’s total space each year. The goal is to have enough funds saved to cover unforeseen repairs and maintain your home’s overall value. In addition, you should have an emergency fund that can be used for non-home maintenance expenses, such as a major car repair or job loss.
- Prioritize Repairs
The euphoria of purchasing a new home is often short-lived for homeowners when they realize that the cost of maintaining their new investment is much more expensive than they thought. While a home warranty helps mitigate some of these expenses, it is still important to know how to budget for them effectively.
Many experts recommend that owners save at least 1% of their home’s value for repairs. However, this figure may be too low for some homeowners, especially those with older homes that require more maintenance. Look into a home warranty to help reduce the cost of repairs. If you are asking, “What is home warranty?” go online and familiarize yourself with home warranty so you can create a feasible budget.
Additionally, local labor and materials costs can vary significantly from one region to another, so it is important to consider these factors when budgeting for repairs. Finally, it is also helpful to prioritize the most urgent maintenance needs, such as a leaking roof or broken in-unit appliances that could create safety risks if left unattended. These items are typically the most costly and should be saved up for first.
- Automate Savings
Home maintenance costs can add up quickly, so it’s important to have a system in place to keep track of them and prevent surprise expenses from popping up. Several methods for budgeting are available, and some experts recommend saving one to four percent of your home’s value each year. Others suggest using the square foot rule, which stipulates that homeowners should tuck away $1 for every square foot of their house. But this method can be misleading, as it glosses over regional cost differences and doesn’t take into account weather patterns, which can cause faster wear and tear.
While many homeowners understand the importance of budgeting for major costs, such as a mortgage and monthly utility bills, it’s easy to overlook other expenses that can eat into your wallet. The euphoria of buying a new home can be short-lived for those who find themselves in the middle of expensive repairs or replacements. The key to avoiding these unexpected costs is planning ahead.