This month, in preparation for home buying season, we’ve been sharing ways savers can practice smart spending on their home — whether it’s small upgrades, like LED lights, or bigger upgrades, such as hot water tanks or kitchen appliances. Budgeting for home improvements is a strategy all homeowners, new and old, should adopt. As much as we’d like to cut home maintenance from our monthly budgets, doing so can help us avoid debt and pay our future selves in the long run.
There are two types of home maintenance activities you can build a savings plan for. The first involves regular home maintenance activities that contribute to a smooth running home, such as changing out your furnace filters, replacing light bulbs and sealing your windows and doors to avoid energy loss. These activities should be done on an annual or seasonal basis, as they can improve the appearance of your home, boost your security and decrease your energy consumption.
The second type of home maintenance to budget for are updates needed over a time span of 5 to 10 years — think fridges, broken sump pumps or hot water tanks. If you’re not prepared for these types of repairs or upgrades, you’ll incur much more than a headache and a couple hours of clean up. Homeowners who don’t allocate a certain amount of savings for larger home expenses like these may face a considerable amount of debt down the road when it comes to replacement and repair costs.
Other things to consider saving for might also include upgrades to wooden windows and doors, kitchen cabinets or outdated faucets. For example, replacing wooden window frames with vinyl or fibreglass not only improves the energy efficiency of your home, but it can also reduce the amount of upkeep required to maintain them. Steel doors as opposed to wooden doors are another alternative — they tend to be safer, easier to clean and stain, as well as enhance the look of your home. All of these larger upgrades can help modernize your home and make it easier to sell one day.
To make sure you’re prepared, we recommend setting up a “big ticket” home maintenance account as well as a “smaller ticket” home maintenance account. If you’re not sure how much money you should be setting away each month for home costs, try using the one per cent rule of thumb. According to this rule, one per cent of the purchase price of your home should be set aside each year for ongoing maintenance. For example, if your home cost $300,000, you should budget $3,000 per year for maintenance.
While this rule of thumb can give you a ballpark estimate of annual maintenance costs, it doesn’t consider other factors that go into maintenance required for a home. There are several environmental or situational factors that can impact the cost of maintenance and repairs to your home, including: age, location and the type of home you have (single-family vs. attached). So be sure to include these elements in your estimate. Your home is one of the biggest investments you can make and if cared for properly, it can provide for you long after your possession date.
At Motive Financial, we understand that you work hard for your money and want to see it grow. That’s why we believe in the benefit of starting small and growing your savings over time — by providing relevant information on today’s financial landscapes, as well as better rates and easy to use products. Our number one goal is to see you reach your savings goals, whatever they may be.