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Home Maintenance Fund

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Emergency funds. Safety funds. Cash on hand. Whatever name you call it, we settle our financial affairs in cash.

I’ve stated emergency funds are the center piece of having your financial life together. It’s there in case things go wrong or something major breaks and needs replacement. It’s there to prevent you from going into debt to pay for something that needs immediate replacing.

Whatever your emergency fund is designed for, be sure to include a little extra on top to handle routine maintenance on your home.

Maintenance is just an inherent part of owning something. If you have a home, having part of your emergency fund dedicated to maintenance costs can go along in preventing something from a real emergency.

The maintenance cost of maintaining it year and year out can be a few thousand dollars. So, on top of your emergency fund, set aside some extra to handle these expenses.

Some expenses may be that need to paint your home, put up a new fence, repair your outdoor sprinkling system, cleaning your rain gutters, pressure washing your drive way, re-seeding or revitalizing your lawn, busted water pipes, insulation checkups, terminate prevention, garage repairs, roof replacement, etc. Makes you want to own your home now huh?

Make no mistake. These costs are real and are necessary, especially if you stay in the home for a long period of time. You don’t have to do them all at once, but putting cash into the maintenance of your home year in and year out prevents major things down the line and keeps your home looking good.

But how much should you set a side? I prefer to use the 1% rule. This rule states that 1% of your purchase price is set aside to handle maintenance needs. For example, if your home costs $200,000, you want to set aside $2,000 for maintenance. It’s just a starting point. You may need more, you may need less. Depending on how big your home is and how much activity goes on it, you may want to do 3% (or $6,000 on a $200,000 home).

You may not need such a fund if your home is brand new. But the older it gets, the more likely you’ll need the cash on hand to handle maintenance needs.

You know you need to maintain to keep it operating so set aside additional cash for it on top of your regular emergency fund. This way, if you need to take care of a major repair in your home and you happen to lose your job at the same time, you have funds to cover it (or a portion of it) until things turn positive.

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