Buying a home is a major undertaking. Not only do you have to cover the cost of a monthly mortgage payment, but you also have to deal with property taxes, homeowners insurance, and, in some cases, HOA dues, which can be hefty.
But those are just the predictable monthly expenses you’ll have to grapple with as a homeowner. There are other costs you’ll bear in the course of owning a home that may not be as easy to work into your budget. These include regular maintenance and repairs for when something goes wrong.
Repairs, however, can run the gamut from minor to major. And it’s important to have plenty of money on hand to address the latter scenario.
New data, however, reveals that a large chunk of homeowners are ill-equipped to cover the cost of extensive home repairs. And it’s these same homeowners who risk landing in serious debt the next time something goes wrong.
In a recent survey from House Method, 35% of homeowners say they have less than $1,000 set aside for repairs. And that means those homeowners are at risk of major debt if something goes very wrong with their properties.
For one thing, the cost of replacing or repairing a single appliance could exceed $1,000. And in the case of having to make major repairs to an air conditioning or heating system, you could be looking at several thousand dollars without warning.
That’s why it’s important to have way more than $1,000 set aside for home repair purposes. In fact, you may want to sock away 10 times that much money in case a major system breaks down and you can’t wait to address it.
It’s important to have money set aside for emergency expenses at all times. And it’s especially essential to do so as a homeowner.
Now as a general rule, it’s a good idea to have an emergency fund with enough cash to cover at least three months of living expenses. If you do that, you may find that you naturally have enough money to cover home repairs — even larger ones.
But some homeowners like to have one sum of money allocated for general emergencies, and another for home repair issues specifically. And that’s not a bad idea.
Either way, though, if you have less than $1,000 in savings, it means you probably aren’t equipped to deal with a larger home repair — or a big financial emergency in general. And if that’s the case, your goal should be to try to ramp up your savings as quickly as you can.
Now if you have under $1,000 in the bank, you’re not going to go from that to a $10,000 savings account balance overnight. But if you make a point to cut back on expenses, you might grow your savings nicely in the course of a year.
Getting a second job could also help you boost your cash reserves so you’re covered for home repairs. In fact, many people specifically get a side hustle to make homeownership more affordable, so you may want to look at different options to avoid remaining financially vulnerable.
This article was written by Maurie Backman from The Motley Fool and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to firstname.lastname@example.org.