{"id":1534,"date":"2021-07-26T17:19:12","date_gmt":"2021-07-26T21:19:12","guid":{"rendered":"https:\/\/www.skypointfcu.com\/wph\/workarea\/?p=1534"},"modified":"2021-07-26T17:19:14","modified_gmt":"2021-07-26T21:19:14","slug":"budgeting-for-new-homeowners-plan-for-additional-expenses","status":"publish","type":"post","link":"https:\/\/www.skypointfcu.com\/wph\/workarea\/blog\/budgeting-for-new-homeowners-plan-for-additional-expenses\/","title":{"rendered":"Budgeting for New Homeowners: Plan for Additional Expenses"},"content":{"rendered":"\n

The stress and excitement of buying a house has come and gone \u2014 it\u2019s time to hang a welcome sign and call it home.<\/p>\n\n\n\n

But a new journey in budgeting begins once you\u2019ve paid the closing costs and tipped the movers. Now it\u2019s time to learn to budget as a homeowner.<\/p>\n\n\n\n

If you\u2019re new to budgeting, buying a home marks a good time to start. The 50\/30\/20 budgeting<\/a>approach is a good foundation, where 50% of your household income goes to needs, 30% to wants and 20% to debt repayment and savings. See how your income breaks down using a budget calculator or a budgeting worksheet with pencil and paper.<\/p>\n\n\n\n

Even if you\u2019re not new to budgeting, there are many additional things to consider now that you own a home. Start with the following.<\/p>\n\n\n\n

Account for new regular expenses<\/strong><\/p>\n\n\n\n

You may have already been covering household expenses, such as electricity and water bills, at another residence, but be prepared for many other regular homeownership costs \u2014 beyond your mortgage payment. Here are expenses unique to homeowners.<\/p>\n\n\n\n

Real estate taxes and homeowners insurance:<\/strong> These are typically, but not always, included in your monthly mortgage payment. Even if you have a fixed-interest mortgage, your payment can fluctuate from year to year because of changes in taxes and homeowners insurance<\/a> premiums.<\/p>\n\n\n\n

Homeowners association:<\/strong> If you live in a planned neighborhood, you\u2019ll likely be part of a homeowners association, which comes with dues that can cost several hundred dollars a month. Even if your HOA fees are due annually, earmark the amount each month so you\u2019re not hit all at once.<\/p>\n\n\n\n

Home maintenance and upkeep:<\/strong> Taking care of repairs and updates can get expensive. Whether you plan on staying in your new house forever or selling it some day, you\u2019ll want to stay on top of maintenance. Rob Jones, a certified financial planner with Hutchins & Haake CPAs in Overland Park, Kansas, recommends that homeowners set aside 1% to 2% of the value of their home each year for upkeep. If your home is older and may need more repairs, plan on the higher side of this range.<\/p>\n\n\n\n

Anticipate bigger project costs each year<\/strong><\/p>\n\n\n\n

Estimating just how much you\u2019ll spend on home maintenance is difficult. The 1% to 2% range is a good place to start, but high-value repairs may push your annual home maintenance spending over this range.<\/p>\n\n\n\n

When you revisit your expenses annually, think about upcoming expensive projects. For instance, you may have a 20- or 30-year-old roof, or a deck that may need replacing every decade or so. Include these projected expenses in your budget in addition to the 1% to 2% for general maintenance.<\/p>\n\n\n\n

\u201cThese things shouldn\u2019t be a surprise,\u201d Jones says.<\/p>\n\n\n\n

\u00bb MORE:<\/strong> What is the real, hidden cost of your home?<\/a><\/p>\n\n\n\n

Revisit your savings and life insurance<\/strong><\/p>\n\n\n\n

You may already have an emergency fund, life insurance policy and retirement account in place, but a review would be good in light of your recent purchase.<\/p>\n\n\n\n

Emergency fund:<\/strong> In a perfect world, it contains enough cash for you to cover living expenses for three to six months. With homeownership, your living expenses \u2014 or those considered \u201cneeds\u201d in your budget \u2014 likely have increased.<\/p>\n\n\n\n

Life insurance:<\/strong> If you want your life insurance to cover your entire mortgage and several years\u2019 of living expenses in the event of your death, you may need to purchase a higher amount. Make sure you\u2019re getting the best value by pricing at least two different-sized policies \u2014 one that would cover only your new liabilities (the house) and one that would cover your home and any existing policies.<\/p>\n\n\n\n

Retirement contributions:<\/strong> Will your current retirement contributions cover your new household expenses after you leave the workforce? You may want to allocate more, particularly if you\u2019ll still be paying a mortgage when you hit retirement age.<\/p>\n\n\n\n

\u00bb MORE:<\/strong> Calculator: Are you on track for retirement?<\/a><\/p>\n\n\n\n

Know where your mortgage fits in debt priorities<\/strong><\/p>\n\n\n\n

Your mortgage is likely your biggest debt, but that doesn\u2019t mean it\u2019s the biggest priority. In judging debt as good or bad, your mortgage \u2014 like student loan debt, typically \u2014 is one of the good guys. A home loan generally comes with a lower interest rate and allows you to purchase your largest asset, one that will hopefully grow in value over time.<\/p>\n\n\n\n

Before you make extra mortgage payments or tack a few hundred dollars onto your regular monthly bill, eliminate these debts if you have any:<\/p>\n\n\n\n