Planning for Eventual Repairs

If you own or are planning on purchasing a house in the near future, in addition to your monthly mortgage payment, it would be extremely wise to plan (aka set aside in a designated savings account) money for eventual repairs. There is an article on American Family Insurance website that discussed how much to budget for home maintenance. Maintenance is not the same as planned improvements.

The article article mentions a several rules of thumb for budgeting: 1) the 1 percent rule – putting aside 1 percent of the total purchase of the home annually, 2) the square foot rule – set aside annually a $1 per livable square foot, and 3) set aside 10 percent of your main monthly expenses (i.e. mortgage, tax and insurance).

But why limit this to just your home. What other items do you use regularly that you know will require maintenance? For many this would be a car. I highly recommend a separate savings account for repairs or maintenance for the vehicle. The amount set aside will in part be based on the age of the vehicle, and what planned maintenance you have for the year. You also want to plan on the “unplanned” items.

By putting money aside, and reserving it for the specific use, you will decrease you need to use a credit card for such repairs. There is a time and a place for credit cards, but unless you are paying them off in full each month, they are essentially a financial cancer that will consume your life. My taking a prevent defense on setting aside funds, you will be much better off.

Also by doing or having your regular maintenance done, you will delay the need for a major repair. Not only will you delay the need for a major repair, but your house and or car will run better.