Video Transcript
Hey Tammy here!
Today I’m going to talk about how you budget for house maintenance, because house maintenance is a little bit different than say your cable bill, or your phone bill, because those expenses happen every month and you have a pretty good idea of how much they’re going to be. But how do you budget for house maintenance because it may go… nothing… nothing… nothing… BOOM big expense… nothing… nothing… nothing… BOOM big expense. And you may not even know what’s going to happen, but you know something’s going to happen. So how do you budget for something that’s so irregular?
Well a good way to budget for that is to set aside a certain amount every month, whether you spend it or not, so that you have money there for when you need it. And a way to determine how much to set aside is you take the value of your home and then you take 1% to 3% of that value and that’s how much you set aside per year. So we said 1% to 3%, how do you know if he should do 1% or 3%? Well it’s going to depend on the condition of your home. If you have a new home (or newly renovated home) then you’re probably looking in that 1% range. Whereas if you have an older home (or home that you know has more maintenance that it is going to need) then you’ll go to the 3%.
As an example, let’s say you have an older home and it’s worth about $200,000… you would take $200,000 multiply it by 3% which gives you $6,000 (now that’s your amount for the year). And then you take $6,000 divided by 12 (which is your 12 months) and you get $500. So each month that family should be setting aside $500 towards a house maintenance budget.
Now some months you may spend it and some months you not and that’s okay. In the months you don’t spend it you’re still going to put it aside. And it is a good idea to put it into a separate bank account so that is not sitting there and maybe kind of tempting for you to spend. That way you know it’s there and then when all of a sudden you have a $2000 expense you have more than enough money there to cover that expense.
Another good question to ask is “What’s the difference between a house maintenance fund and an emergency fund?” Well the main difference is that a house maintenance fund is for expenses that you know are going to happen. You know your house is going to need some kind of maintenance, you may not know exactly how much and you may not know exactly when, but you know your house is going to need some kind of work done eventually. Whereas an emergency fund is money you’re setting aside for things that you could not have seen coming, something that comes along and blindsides you and you didn’t know that would’ve happened. So that’s the difference between a house maintenance fund and an emergency fund. And if you want to know more about an emergency fund I have another video, I’ll put a link to it down below so you can watch and learn more about emergency funds.
Action Step
Action step for this video is to figure out how much your family should be setting aside each month for house maintenance. Step one is to figure out the value of your house. You could use your property tax assessment or maybe you just have a good idea how much your house might be worth. Step two is to figure out whether you are going to use 1%, 2% or 3%. So figure out if you have that newer house or that older house. And then take your house value, multiply it by that percentage and that will give you how much per year. And then you take that number and divide by 12, and then that is how much each month you should be setting aside. And then you add that number into your budget. And that’s how much you should be setting aside every month for house maintenance.
Hopefully that was a helpful introduction on how to budget for house maintenance costs. If you have any questions or comments feel free to leave a question or comment, or get in touch with me as I would be happy to discuss it with you more.
That’s if for now!