Having lived in a house that needed constant upkeep when I was young, I know the value of having money on hand to take care of home maintenance. As a new homeowner, that means I’m going to christen a home maintenance and improvement fund so that when such issues appear, I can handle them.
What’s a home maintenance fund? A home maintenance fund pays for the continual maintenance of things that we have right now. This includes things like pest spraying, weatherproofing the deck, having the chimney swept, replacing furnace and air filters, replace worn-out carpets, and so on.
How much will that cost? I’ve heard various recommendations, but we’ve settled on putting away 1% of the assessed value of the house and land annually into the account for home maintenance. This means that an amount equal to 1/12th of 1% will be pulled out of our primary checking each month into that account (for a $200,000 house, that means $166 a month), and then when home maintenance issues occur, we’re free to tap that fund to get the lawnmower fixed or replaced, to buy sealant, and so on.
OK, what’s a home improvement fund? Over time, we’re going to want to upgrade a few things around the house. We haven’t even moved in yet and my wife is talking about planting a small row of fruit trees along the farm-facing edge of our property, for example. Things like this are things that don’t currently exist but can improve the value of the property over time. We want to plant two apple trees and two cherry trees, and if we care for them properly and guide them to adulthood, they’ll increase the value of the home. Another topic we’ve talked about is installing quartz countertops in the kitchen.
We also want a home improvement fund so we can avoid home equity loans, a strategy I talked about last week.
How much will that cost? We estimate that improvements will likely be more expensive than maintenance, so we’re going to sock away 2% of the assessed value of the house and land annually into that same account for home improvements. This means an amount equal to 1/6th of 1% will be pulled out of our primary checking each month (for a $200,000 house, that means $333 a month). This is pretty high, we think, but it does enable us to start thinking and planning home improvement projects and knowing that we’ll be able to pay for them when we decide what to do.
It seems expensive now, but if we look at this as just another bill to pay, it will lead us to success in the long run.