Owning a home is a big financial responsibility. There are several extra expenses that come along with homeownership. Therefore a homeowner’s budget should look different than a renter’s budget. Following these budget tips for homeowners will set you up for financial success.
Here are 5 Budget Tips for Homeowners:
1- Home Maintenance and Repairs
Every homeowner should have a monthly amount being set aside for home maintenance. You can set aside just a standard amount of money each month or you can specifically budget for an upcoming home repair. For instance, if you know that you’ll need to replace your roof before the beginning of the winter you may set aside $600 each month in order to save all of the money needed to pay for the repair. Whether or not you are saving for a particular home repair having a line item in your monthly budget can really protect you.
2- Keep Household Expenses Affordable
While setting up your budget try to keep your household expenses below 40% of your take home pay. This means that the total of your mortgage, taxes, insurance and utilities is less than 40% of your take home pay. This will allow you to continue to save for various life needs, pay your other bills and enjoy your life. Avoid becoming housepoor by keeping your household expenses below a certain percentage of your income.
3- Have 6 months of Household Expenses Saved
While owning a home it is key to have about 6 months of your household expenses in a savings account. This money will be a safeguard should you experience any life circumstances that would greatly reduce or stop your income. Having 6 months of household expenses set aside will give you a cushion in the event of an injury, job loss, or medical emergency. Every homeowner’s budget should provide the opportunity to save enough money to keep 6 months of household expenses in an account just in case.
4- Don’t Forget Miscellaneous Expenses
Another budget tip to keep you on track is to remember all of the various monthly expenses that come along with homeownership. Be sure to remember monthly utilities such as trash and sewer, electric, gas and water bills. Also factor in any homeowner association dues.
5- Life Insurance
Having a good life insurance plan is integral in protecting your family and assets. No one wants to think about the tragic event of passing away and leaving your young family behind. However, you’ll want to ensure that your family is protected should you pass away unexpectedly. Your life insurance plan should be enough to replace your income until major expenses are paid, such as your home mortgage or children’s college education expenses. While this budget tip is not a pleasant one, it is paramount to the well being of your family.
By following the budget tips above you will have no surprises as you adjust to your new budget as homeowners. Being thorough in calculating your new expenses will give you financial freedom and peace of mind. Utilizing these budget tips will allow you to enjoy homeownership.