Tips on creating a financial plan for your home
For many families, a home is the biggest – and most important purchase they will ever make. Because of this, it is important to make a financial plan for your home. By taking a realistic look at monthly costs around the house, it is easier to understand the cost of your home’s upkeep and better prepare for planned – or unexpected – expenses.
1. Pay a little more every month
The mortgage is by far the biggest monthly expense for all homeowners. While paying a little extra each monthly might not seem like it makes a big difference, as little as $100 more on your mortgage payment each month can create significant savings over the life of a loan. If you feel confident with the amount left on your mortgage, consider putting the same amount away each month towards a discretionary fund for home improvements.
2. Find the best insurance policy for your home
Many homeowners fall prey to over – or under – buying insurance. Basic coverage can vary widely by policy and state; it is important to know exactly what your policy does and does not cover. Likewise, it is important to investigate optional policies such as flood, earthquake, or hurricane insurance, which may not be covered in a basic plan.
3. Prepare for repairs and renovations
Owning a home comes with a number of unexpected expenses on repairs. However, it is possible to prepare for renovations based on the lifespan of certain appliances. A roof has a lifespan of 20-25 years, a HVAC system can last for 15-20 years, and water heaters need to be replaced every 8-13 years. By understanding the lifespan of your major appliances, you can better prepare for major expenses as they come.
4. Budget for annual expenses
HOA dues, specials, and taxes are just a few examples of additional annual expenses homeowners face each year. Ensure these costs are built into your monthly budget; this prevents these costs from creeping up on you and requiring you to dip into your savings or renovation fund. When it comes to taxes, make sure to take into account changes in the area, increases in property taxes, or the appreciation of your home.