4 Issues Homeowners Face When Budgeting For Home Repairs
Once you've purchased a new home and all the papers are signed and filed, you might think the financial heavy lifting is done. However, securing and paying your mortgage is just part of the process. You'll also need to take the costs of home maintenance and repairs into account, and many homeowners choose to create a budget for these expenses. While setting aside a certain amount of money each month for home repairs works for some people, there are a number of common problems that homeowners run into with this budgeting system.
1. Your budget isn't a good fit
Most financial experts recommend that homeowners budget 1 to 2 percent of their home's purchase price for annual maintenance. According to this model, you should be setting aside around $2,000 to $4,000 each year if your home cost $200,000. Maybe you decide to budget $200 each month to meet your goal. This may be a good starting point, but Kiplinger explained that many people don't realize that there's no true one-size-fits-all budgeting plan. Some people simply don't have the money to set aside each month, and that can lead to budgeting issues in the long run.
2. You don't have a safety net
As mentioned above, there will often be times when your budget doesn't cover the costs of extensive home maintenance or repairs. In these situations, you'll need to have a safety net to fall back on, and many homeowners neglect this essential financial padding. If you don't have a cash reserve for emergency expenses, your budget may fall short and you'll end up taking out a loan to get the repairs done. The payments can quickly become overwhelming, especially when you already have a mortgage.
3. It seems impossible
The truth is that budgeting, especially for intangible expenses, is hard for some people. The money you're setting aside every month is dedicated to events that may or may not happen. For that reason, some homeowners end up skimping on their maintenance funds and spending the money on something more concrete, like a remodel or appliance upgrade. This often leads to problems when an unexpected mechanical problem crops up and the maintenance money won't cover the repairs.
4. You underestimated the costs
First-time homeowners sometimes don't realize the true costs of purchasing a home. U.S. News & World Report noted that individuals can often handle their mortgage payments, but aren't equipped to pay maintenance and repair expenses, especially for an older home. If a number of appliances and systems break down in succession, the costs can be much higher than you imagined. This will throw a wrench in the plans of even the most responsible budgeter.
If you find yourself facing any of these problems, you should look into a TotalProtect® Home Warranty. When you protect your home with this plan, you can rest assured knowing that you won't be caught off guard by any large appliance or system problems.
The information in this article is intended to provide guidance on the proper maintenance and care of systems and appliances in the home. Not all of the topics mentioned are covered by our home warranty or maintenance plans. Please review your home warranty contract carefully to understand your coverage.