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I would appreciate it if anyone would like to share some wisdom concerning how much money should be kept in a fund for both ongoing home maintenance (i.e. servicing HVAC unit, painting when needed, landscaping materials, plumbing repairs, saving for long term items such as a new roof, etc.). I have read some articles that say at least 1 percent (and in some cases up to 3 percent) of a home's value should be allocated towards home maintenance every year as a guideline. And I know that can vary depending on the property's location, age, etc. but in general, does that seem to be on target?
A question that comes to my mind is not just how much should be set aside but what the balance needs to be. To illustrate: A house is valued at $150,000, so to add some more cushion money, 2 percent is set aside in a year (equal to $3,000). In five years, the contribution amount should be $15,000 if you use that guideline. But it's likely some of that money has been spent during the 5 years on ongoing maintenance and various projects.
So my question is not only how much should be set aside, but what should one aim for as a minimum balance for emergency and ongoing maintenance/projects considering that some of the money will be spent at various times for home needs?
My specific case is also a little unique because the house was built with a small mother in law quarters with its own kitchen and bathroom, so there are two heat pumps, kitchens, to think about in considering replacement costs. I'm just looking for any insight people may have since I'm balancing how much of a home fund I need versus other financial goals, such as saving for retirement, etc. Thanks!
So my question is not only how much should be set aside, but what should one aim for
as a minimum balance for emergency and ongoing maintenance/projects considering
that some of the money will be spent at various times for home needs?
This depends on how old your systems are and how long you expect to be there.
Retiree's will often update everything (or buy new) at their "retire in place" home
so they can sorta count on NOT needing money for any of that work until they're gone
(and then leave it to their adult children to deal with 20-30 years later).
If a roof will cost $10,000 and last 25 years ... that's $400 per year average.
Repairs or emergencies are different but similar age/wear can be calculated with everything else.
In fact it has been done a few times already.
Percentages and rules of thumb tend to get messy.
Last edited by MrRational; 05-26-2014 at 10:18 AM..
Each system for your home has a lifespan. Depending on the roof you may get 25 years, 50 years. Who knows? If you buy an older home how many years do you have left with the roof that you have?
You can check your water heater and see how many years you may have left for that. The manufacture date and year's lifespan should be on the water heater.
Residential lock's and door knobs may need to be replaced after 5 years for cheaper locks and up to 20 years for higher grade locks.
Faucets and other plumbing fixtures use is determined by the kind of water you are pumping thru them. The water in our area is hard with a lot of mineral deposits that can be harsh on the hardware. Many people like to replace them because they look warn after 5 or 6 years.
Paint. My parents have been in their home for almost 11 years. They live in the city of Surprise Arizona. Paint on the outside of their home in Arizona just does not last the way it did on the coast in California. The hot Arizona sun wears out the paint.
The real deal is that some things are going to have a short replacement time frame while others will last for many years. Still you don't want to have to get a loan to fund a roof replacement. Each geographic location also has different things to consider.
Never been a fan of setting aside reserves for every possible use. Just have one emergency fund. There's no reason to have $10k set aside for your house, another $5k set aside in case you have a major car repair, $10k for medical bills, another $10k in case you're laid off from work. They're very unlikely to all occur at once and that's just a lot of wasted capital sitting around doing a whole lotta nothing.
Home repairs generally aren't emergencies. It's not like you wake up one day and the roof suddenly needs replacing, the house needs painting, the water heater goes out, etc. Most of that stuff is pretty predictable if you're paying attention to it. If you know you're going to need to put on a new roof in the next five years, start budgeting to replace your roof. If your water heater is 25 years old and rusted out, budget for a new water heater.
Yeah... DH and I never had a separate house fund. It was just part of our emergency fund.
BTW - the water heater CAN just go out, so that CAN be an emergency!
Ours did, and we just put the amount on the charge card, and paid it in full when it came due.
You can budget it anyway that you want. You can stick the money in a mattress or a savings account. You can also place it in a CD or some other kind of investment. You can have a single account holding money for the emergency that will happen. What ever you do or how ever you do it realize that everything on the home is replaceable and has a lifespan.
With my former post I noted possible lifespans on products or systems that the home has. Realizing that in a specific amount of time you will need to replace those items is valuable to the home owner that does not want any surprises. Sure things can die an early death and we need to be prepared for that as well.
How many different specific funds do you need to have? Why not have one "fund", called "things I might need money for some day", and keep a reasonable amount of money in that fund to cover whatever you might need money for.
You don't need a fund for travel expenses to an unexpected funeral, and a fund to bail an in-law out of jail, and a fund to replace the riding lawn mower, and a fund for emergency veterinary expenses, and a fund in case somebody blackmails you. Just have one fund to cover them all. Invest it in a way that you have some growth, but it is immediately accessible.
How many different specific funds do you need to have? Why not have one "fund", called "things I might need money for some day", and keep a reasonable amount of money in that fund to cover whatever you might need money for.
You don't need a fund for travel expenses to an unexpected funeral, and a fund to bail an in-law out of jail, and a fund to replace the riding lawn mower, and a fund for emergency veterinary expenses, and a fund in case somebody blackmails you. Just have one fund to cover them all. Invest it in a way that you have some growth, but it is immediately accessible.
How do you know how much you need if you do not budget that out? How do you know how much to keep if you have no idea what the items in your home cost? You don't have to have dozens of accounts for all the things you have. You should know how much you are going to need though.
We keep $1,000 or so locked up in our home. Just in case we need cash now.
You need an emergency fund. This to me is not the same as a replacement fund. If that water heater gives out two years early that is an emergency. I like to have at least $5,000 in this fund and I want it liquid. I would prefer to have 3 months cash on hand in the bank. We are building toward that.
You need a replacement fund to replace items that have exceeded their use full life. Not saying that you need to replace a perfectly good item that happens to still work. It sure is nice to have the cash though when that item gives out. Upgrades, replacement, remodel it is all the same as far as I am concerned. I prefer to pay with cash and not use credit. This money can be sitting in a CD or some other instrument. This money does not have to be so liquid. The amount would depend on your own situation and the kind of home you own.
Bundled with that replacement fund, is savings for big ticket items that you are saving for. Pay cash for a new car, pay for a dream vacation, how about a boat or airplane? These are things I just do not want to go into debt for. You can keep all that money together, just realize in your mind or on your computer somewhere how each dollar is to be spent.
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