The following post is by MPFJ staff writer, Melissa Batai. Melissa is a freelance writer who covers topics ranging from personal finance to business to organics to food. She blogs at Mom’s Plans where she shares her family’s journey to healthier living and paying down debt.
My husband and I previously lived in an area where both home prices and annual property taxes were well outside our financial means, so we always rented. When we moved to a new area of the country, we could finally afford a home, so, last year, my husband and I, both in our 40s, finally made the leap to home ownership.
We’ve now lived in our home for 13 months, and we’ve learned a lot, especially about the importance of saving for home repairs and maintenance.
Home Repairs—It All Has to Break at Once
The home we purchased is 18 years old. We knew buying the place that it had its original central air conditioning unit, and with a lifespan of 15 to 20 years, we’d likely have to replace the unit sometime. Since we live in Arizona, surviving without central air is not an option. At $4,000 to $6,000 for a replacement, this home improvement is not a cheap one.
However, that was the only home repair we knew would be coming up soon; the rest of the house passed inspection with flying colors.
Since we moved in, we’ve had several issues that have come up.
The hot water heater burst the first week that we moved in–$560. This went undetected for a few days, so the water leaked into our pantry. The previous owners had given us a homeowner’s warranty, so part of the cost of repairing the hot water heater was covered, but we still had a significant amount to pay out of pocket. In addition, the realtor nicely sent over her contractor to open up the drywall and dry the wet interior. Unfortunately, he never came back to fix the job, so we still have a large hole in our drywall in the pantry and will need to get that fixed at some point.
Air conditioner repair/maintenance–$200. Our first summer here, we didn’t have any trouble with the air conditioning. This summer, I noticed that our air seemed to be running more often and that it wasn’t as cool in the house. In July, our electric bill was $120 more than usual, so I called a repairman. He replaced two pounds of Freon and charged us $200.
Yep, the air conditioner is about ready to give up the ghost, but it will probably bleed us to death financially first.
Home repair tools–$200. Since we always rented, we had to buy basic home repair tools like a ladder, saw, leaf blower (we don’t have leaves but little pieces that drop from our trees and can’t be raked up because our “lawn” is not grass but rocks), etc. My husband discovered that one of our trees was growing into our cement fence, so he had to buy tools to cut down the tree before the tree could push the cement blocks out of place, causing a more expensive repair.
We’ve also had other cosmetic issues that we’ve put off but that will need attention at some point:
Broken doorbell. The doorbell worked during the home inspection, but it hasn’t worked since then.
Broken window treatments. The previous owners left us two blinds that fall down if you try to pull them up. They need to be replaced, but that hasn’t happened yet.
Patio paint. The whole house’s exterior was repainted before we bought it. Our outdoor patio has a roof over it. The previous owners painted the cement ceiling that people can see above the patio. In the 13 months that we’ve lived here, huge patches of paint have come off the ceiling.
How Much Should You Save for Home Repairs
According to US News, “On average, homeowners will spend between 1 to 4 percent of a home’s value annually on maintenance and repairs, which tend to increase as the house ages.” That means if you bought a $200,000 home, you should be setting aside $2,000 to $8,000 annually for repairs, which is no small chunk of change.
However, most people don’t do that, and I can understand why. That’s a lot of money to set aside for an emergency that may, or may not, happen this year.
“‘People know that if they ignore maintenance checks at the 30,000-mile mark on their car or don’t go to their dentist, they could have more serious and more expensive issues to contend with, but we don’t always give our homes the same preventative checks,’ says David Lupberger, a veteran contractor and principal at remodeling and contracting consultancy Remodel Force. ‘The mindset is, if it’s not leaking or smoking, I have time’” (US News).
Considering “just 38 percent of Americans said they could cover an unexpected emergency room visit or even a $500 car repair with cash on hand in a checking or savings account” (CNBC), many, many of us are not saving for unexpected home repairs.
Why You Should Save 1 to 4% Per Year
When we’re talking so much money, why should you save 1 to 4% of your home’s purchase price per year? The answer is simple. Fairly easy repairs, like replacing a water heater, may only cost as much as 1% of your home’s purchase price, but other repairs, like a new roof, can cost much, much more.
If you save 1 to 4% per year, that will allow you to have cash for basic repairs while still saving for bigger repairs that will occur later, like replacing the air conditioning or heating or the roof.
How to Start Saving for Home Repairs and Maintenance
Let’s be honest, when it comes to home repairs it’s not a matter of IF a home repair will come up, but WHEN.
But many people can’t get beyond the sticker shock of saving 1 to 4% per year, especially if it means $2,000 to $8,000 or more annually! However, there are strategies you can use to make it easier to save.
Save what you can. If your budget is tight, like so many people’s, focus on what you can do. Set aside a dollar amount to put into savings. Right now, for my husband and I, that means setting aside $50 a month for home repairs. Yes, that’s only $600 per year, but it’s better than saving nothing. Start where you’re at.
Make your savings automatic. Once you decide on an amount to set aside every month, make your savings automatic. Set up automatic withdrawal from your checking account to a designated account so you don’t even have to think about saving the money.
Increase your savings with each raise you get. As you earn more money, set aside a portion of the earnings to go to your home repair/maintenance fund. Maybe this year, you can only save $50 a month, but maybe after a raise next year, you can bump that amount up to $75 a month. Keep doing this year after year, and you’ll be well on your way to saving 1 to 4% of your home’s purchase price for repairs.
Bank unexpected money. Rather than blowing your tax refund (if you get one) or any unexpected rebates or reimbursements that you get, put some or all of that money in your home repair/maintenance fund.
Invest the money. You don’t want to invest your home repair/maintenance money in the stocks, but you could invest it in mutual funds or a checking or savings account that pays a higher rate of interest, especially as the amount you have grows. By doing this, the money is still liquid, but you are earning more interest.
How about you all? Do you have a home repair/maintenance fund? If so, what percentage of your home’s purchase price do you set aside per year?
Share your experiences by commenting below!
***Photo courtesy of https://www.flickr.com/photos/vinzcha/3898537817/in/
