Basements flood, refrigerators break, and furnaces go on the fritz. Even with good maintenance habits, unexpected home repairs happen and require immediate attention — and money.
Instead of letting the inevitable happen and finding yourself unprepared, having money put aside in a home repair account can provide a financial buffer and alleviate stress.
But how can you start growing your savings, and how much should you save? Here are a few strategies:
1. Start with a dedicated sum
Start your home repair budget the day you close. When you purchase your home, if you can afford it, immediately set aside a sum of money for home repair in a high-yield savings account.
You can even build a home repair account from the moment you start your home search. Set aside a percentage of your paycheck every month. If you’re currently renting, you can add your previous rental’s security deposit when the landlord returns it. If you recently sold a home, put gains you may have received on your previous house into the account, too.
2. The square-foot rule
According to The Balance, a good rule of thumb is to set aside a dollar for each square foot of your house per year. For example, if your new home is 3,000 square feet, set aside $3,000. Five years later, if you haven’t tapped into it yet, you’ll have $15,000 available for repairs.
3. The 1% – 4% rule
Not all homes are created equal, and while older homes can be twice as charming, they can also require significantly more money for repairs each year. Try setting aside 1% to 2% of your home’s purchase price each year for places that are less than five years old, and 4% of a home’s value for dwellings greater than 25 years old.
4. Use your tax return
Instead of using your tax return on a vacation or new TV, try putting it straight into your home repair account each year. You can also squirrel away money you receive as gifts. And again, if you have a high-yield saving account, that money can grow over time.
5. No-spend challenge
Saving money is usually done by practicing good financial habits over time. But you can kickstart your saving by trying a 30-day challenge. Avoid unnecessary and impulse buys for just 30 days, then deposit the money you save into your home repair account. You could save hundreds of dollars by not engaging in impulse shopping — and you may be motivated to continue on into a second month.
Managing your home repair budget
Setting money aside for home repairs is just one way to help get ahead of unexpected expenses. Taking an inventory of the age and condition of your home’s components and appliances is another. You’ll need to adjust the amount you save each year if, for example, you know your refrigerator is on its last legs or your roof is one patch away from needing to be replaced.