As a new homeowner, it’s important to have a plan in place for home repairs. This will help avoid financial troubles in the future.
A common rule of thumb is to save 1% of your home’s value each year for repair and maintenance costs. This can be done by creating a separate savings account and setting up automatic transfers.
Create a Separate Savings Account
Home repair costs are an inevitable part of homeownership. To help manage these expenses, many experts recommend creating a separate savings account specifically for home maintenance. This way, you can avoid using credit cards to cover these costs, which often come with high interest rates. Consider setting up automatic transfers from your paycheck or bank account into this savings account each month. You should also earmark any financial windfalls like tax refunds or monetary gifts to this account.
Keeping a separate savings account for these purposes makes it easier to monitor your progress and stay on track. It also keeps the money away from your emergency fund, which you may be tempted to dip into when faced with unexpected expenses. Putting the money into a high-yield online savings account, can make it easier to earn interest. This can make the difference between meeting your goal and falling short.
Prioritize Your Projects
Home repairs and renovations can be expensive, and it’s important to be prepared for these expenses. One way to do this is to set aside money for these expenses in a separate savings account. This will help you avoid using credit cards for these purposes, which can have high interest rates.
Another way to budget for home repairs is to prioritize your projects. There are certain projects that should take priority over others, such as fixing a faulty roof or updating an outdated electrical system. This is because these issues can be dangerous for your family’s health and safety.
Other projects should be saved for later, such as installing energy-efficient windows or upgrading the landscape. These projects have a higher ROI and can increase the value of your home. You can also look for discounts or coupons on these services to make them more affordable. When you do complete a repair or renovation, try to
schedule it when your children aren’t home.
Hire a Professional
If you’re a homeowner, you already know that the responsibilities of owning a house go far beyond paying your mortgage and taxes. You also have to pay for maintenance and repair costs. Repair costs can be less if you are covered under a home warranty. If you are wondering what home warranty covers go online and research home warranty as there are a vast number of companies who offer this type of service. Be sure to do your research and look at reputable reviews.
One rule of thumb is to budget 1% of your home’s value annually for repair and replacement costs. However, this number can vary depending on your area and the type of home you own.
Another common approach is to budget on a per-square-foot basis, which suggests that homeowners should set aside $1 for every square foot of their home’s value. However, this method glosses over other important factors, like labor costs for home services.
In addition, home repair costs can increase based on local weather conditions. For instance, severe storms can cause additional wear and tear on your roof and other outdoor components. To learn more about how the cost of home repairs may impact your credit score, you can check your Experian Credit Report for free at any time.
Avoid Credit Cards
The costs of owning a home are more than just a monthly mortgage payment and property taxes. There are also a number of expenses that need to be paid regularly, such as insurance, maintenance and repairs.
For those who struggle to cover these expenses, a credit card may seem like a reasonable solution to finance home improvement projects. However, this is usually not the best option. Credit cards often have high interest rates, which can quickly outweigh any rewards or cash back that you may get.
The best way to avoid credit card debt when budgeting for home repairs is to save money in advance. This is why it’s a good idea to create a separate savings account specifically for home improvements and repairs, and to prioritize these projects over other spending. If you have trouble saving enough to cover these expenses, consider other options, such as a personal loan or a home equity line of credit (HELOC). These options tend to have lower interest rates than credit cards and allow you to borrow only what you need.