Most of us budget when we want to buy a house, but budgeting after we are homeowners, that’s another story. After you’ve signed the papers and the movers have unpacked your last box, you still need to have a budget for “what’s next.” Without this, you may find yourself with some unexpected needs and no way to pay for them. Here are a few pointers.
Account for new regular expenses
Even as a renter, you probably had some bills you’ll continue to cover as a homeowner – electricity, water, gas, internet, etc. But when you buy a home, there are new expenses to add to this list.
- Real estate taxes and homeowners insurance: These often are included in your monthly mortgage payment. If any of these change, even if you have a fixed-interest mortgage, your payment can fluctuate from year to year because of changes in taxes and homeowners insurance premiums.
- Homeowners association: We see a lot of HOAs in today’s home market. These fees can be as high as several hundreds dollars a month. HOA dues may be payable monthly or annually. If you pay these annually, be sure to budget for them so you have the money to cover the costs when it’s time.
- Home maintenance and upkeep: As a homeowner, you’ll want to stay on top of maintenance. One rule of thumb is to set aside 1% – 2% of your income to cover these costs. If your home is older, you may need to plan even a little more.
- High cost repairs: If you have high cost or high value repairs, you’ll need to have budgeted even more. A new roof, deck replacement, or other big projects like finishing a basement or covering plumbing emergencies may cost more. Plan ahead.
- Finally, make sure you continue to build your emergency fund. Three to six months of living expenses is what most financial planners recommend you always have in a ready-to-use savings plan. This is only for emergencies, but building it up should be part of your budgeting plan.
Being a homeowner is a great thing, and with all great things comes great responsibility! Be ready for anything, homeowner!