Owning a property comes with many challenges. You need to keep your property well maintained, take care of all the expenses that go with it, and know how to choose the right tenants if you opt to rent it.
On top of it all, you need to keep your finances in check. This article will offer you some essential personal finance tips. Keep in mind that there is more to keeping your finances in order than this article covers, so consider hiring a property management company to help you navigate the tricky ways of finances.
Keep things simple
When you first get your place, you will be tempted to buy the ideal furniture or remodel certain areas to make them unique to you. While this is entirely okay, don’t go on a spending spree to change and improve many aspects of your home. You can keep your house nicely decorated without breaking a bank.
Remember that you’ve just spent a lot of money to obtain your new home, and depleting your savings further is not the smartest idea for new homeowners. Renovating and remodeling to the point that it jeopardizes your status as a homeowner because you aren’t able to make your payments on time just defeats the purpose of having your own home in the first place.
While we are on the subject, resist the urge to take a home equity loan to take care of everything. That just defeats your efforts to pay off the mortgage early.
Have your place insured
There are several types of insurance that you should get for your home. These include:
Homeowner’s insurance, which includes basic coverage for your home and everything in it.
Liability coverage protects you from a lawsuit if someone gets hurt on your property, for example. Your best bet would be to get an umbrella policy covering many different accidents and troubles that you or someone else might run into.
Various disaster insurance policies are optional policies that cover flood, earthquake, and hurricane damage. As part of your home financial plan, you should research what disaster coverage, if any, you need in your area and what your standard policy already covers.
Put some money aside for emergency repairs
Once you start living at a place of your own, you will see that entropy rules – that is, that everything eventually falls apart even if you do your best to maintain it.
You should keep a log of your major appliances’ age so you can estimate when they’ll need replacing. For instance, a roof needs to be replaced every 20 to 25 years, heating systems last between 15 years and two decades, while water heaters break down in 8 to 13 years.
Then get estimates on what replacements will cost and start saving. Keep in mind that if your home is 20 to 25 years old or even older, many of the home’s equipment and assets are near the end of their useful life.
Keep records of everything you do
Keeping records is a skill that is essential as a homeowner. Every improvement you make to your home, whether small or big, will increase its resale value. You have to be able to show receipts for all the upgrades, and so it’s essential that you keep receipts and records of everything right from the start. When and if you choose to sell your home, this will help you maximize your tax-free earnings.
You do not have to keep a paper trail, as keeping legitimate digital copies works fine too. Just make sure you have some kind of organizational system for your records to easily navigate through them in the future and get your money’s worth.
Consider other costs of owning a home
When adding up homeownership expenses, your mortgage payment is just the tip of the iceberg. There are other things to budget for after buying a home beyond what you pay to your lender each month.
These include mortgage, insurance, and property taxes, together with utilities, pest control, Internet, and phone services.
Your mortgage payment may also include escrow for your annual property taxes, homeowner’s insurance, and homeowner’s association dues. If not, you’ll need to separately have these hidden costs of owning a home in your budget.
Be prepared to make changes to your budget
Once you sum up all of the costs of owning a home, your job is not done. You will have to keep regularly reviewing and adjusting your spending and savings plan.
Checking in with your budget regularly can help you track things to budget for after buying a home, like maintenance and repairs and seasonal changes that may affect your utility bills. It’s also a good way to stay on top of all of your expenses, not just homeownership costs, and monitor your savings progress, which can help you avoid overspending and taking on debt.