Budgets and Money

Budget Planning for Home Repairs

Don’t let the cost of home repairs and maintenance surprise you; budget for them with two simple approaches. The 1-4% or the $1/sq. ft. rule could be useful in establishing your home maintenance budget.

Creating a Budget for Home Repairs

The financial responsibilities of home ownership certainly don’t begin and end at closing. All too often many first-time home buyers find themselves surprised at the cost of emergency repairs and/or ongoing home maintenance once they finally move into their home. For this reason, it’s wise to start budgeting for routine home repairs and maintenance by setting aside a little each month.

There are two common “rules of thumb” regarding how much money you should budget for on an annual basis for home repairs. Here we’ve presented you with both, so you can see which might make better sense for you when creating a budget.

The Home Repair 1-4% Rule

This is a “rule of thumb” that no one can truly seem to come to a consensus on. A wide berth of financial experts across the industry suggest that you simply set aside as little as 1% or as much as 4% of the total value of your home each year in order to budget for maintenance or emergency home repairs. So if you paid $250K for your home, you would set aside somewhere between $2,500-$10,000 every year.

While this may seem like an efficient way to save for home repairs, critics of this rule of thumb argue that the amount set aside is somewhat arbitrary, and doesn’t account for a wide variety of factors, such as the age of your home, whether most of the value of your home is in the land itself, whether your home is attached or single family, etc. These criticisms are valid, and if the aforementioned factors apply specifically to your home, or if you feel it’s unreasonable for you to set aside that much cash every year, you might prefer the next option.

The $1 Per Square Foot Rule for Home Maintenance

This rule of thumb uses the size of your home to budget for your home repair fund, instead of the value. So if your home is 2,500 square feet, you would need to save at least $2,500 per year for home maintenance and repairs.

If you’re worried that neither of these rules actually allow you to save up enough to cover the high cost of home repairs in your area, then it’s important to do a little research. What might your home need to have replaced in the next five years? A backyard fence? Flooring? Old pipes? A new roof? Are there issues in your area with excessive moisture build-up or even flooding?

In order to get a good idea of what your most pressing home repairs might cost, you can gather quotes from local contractors, or talk to other homeowners that you’re friendly with in your neighborhood about the costs of their own recent home repairs. If you prefer to do less legwork, you can always hire a licensed home inspector to assess your home, help you identify its biggest weaknesses, and give you estimates for the cost of repairs and replacements in your area.

You can find more info about creating an emergency fund for urgent home repairs or other saving scenarios in the Protective Learning Center.

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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

Learning Center articles may describe services and financial products not offered by Protective Life or its subsidiaries. Descriptions of financial products contained in Learning Center articles are not intended to represent those offered by Protective Life or its subsidiaries.

Neither Protective Life nor its representatives offer legal or tax advice. We encourage you to consult with your financial adviser and legal or tax adviser regarding your individual situations before making investment, social security, retirement planning, and tax‐related decisions. For information about Protective Life and its products and services, visit www.protective.com

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Budget Planning

If you're a homeowner, budget planning for home repairs can be tricky. While there are many different methods to budget and plan for home repairs, you need to find out what works best for you. The most important thing to remember is to try and save so that when home repairs are needed, you'll be ready. For more information, visit our learning center.

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