Introduction: You just purchased a brand-new house, and this may be the first home you have owned – Congratulations! Now comes the important task of ensuring that you have a budget in place that will consider your mortgage and other expenses while also planning for your future.
A popular approach to budgeting is the 50/30/20 rule. That is taking your household income after tax and dividing it into three separate areas. The breakdown is as follows – 50% goes to Needs, 30% to Wants, and 20% goes towards Savings. Many of the expenses associated with owning a brand new home will fall under the Needs category. Yet, the savings and investments part often gets overlooked or neglected.
Let’s take a look at some of these expenses in closer detail.
Home Expenses you Should Budget For
You now own your own home, keys in hand. And you’re about to realize there are more costs associated with buying a brand new house than just paying the mortgage. So here is a list of some common expenses to keep top of mind and build your budget.
Cable, Internet, and Phone
It seems self-explanatory, sure. But, keep in mind there will be installation and setup fees associated with these services, and they can pack a bit of a punch if you aren’t expecting them.
Homeowners Association (HOA)
If you purchased your home in a residential community, you might have to pay a monthly maintenance fee. These fees can range anywhere from $250.00 to almost $350.00 each month, so make sure you check if your new home is part of an HOA.
Mortgage Life Insurance
A critical part of owning a home and paying a mortgage is ensuring you have the proper insurance in place. Mortgage life insurance pays down your mortgage in the event of your death. While not really a comfortable topic to think about, it is an important one. There are a couple of options available, such as getting mortgage protection on your life insurance. But, mortgage life insurance is especially popular amongst new homeowners. Regardless of which insurance you choose, be sure to make this a consideration and a priority in your budget.
Furniture & Appliances
If you are used to renting where appliances such as washer, dryer, and even microwave were included, you may be required to buy new appliances immediately or be prepared to replace current ones at any time. This will depend on what is already included in your new home. Appliances are not cheap, so having this built into your budget will be a huge relief when the inevitable happens.
Let’s face it. Things will eventually break or break down, and it is now you, the homeowner, who handles repairing or replacing it. Unfortunately, home maintenance can get pricey fast, so do yourself a favor and prepare now.
If you played the game Monopoly, you already know how much of a pain these can be. Prepare accordingly, as property taxes are the second largest expense for homeowners.
Revisit Your Finances and Savings Plan
Prepare yourself. A lot of expenses will come up that you didn’t expect, and some of them will cost a lot. Unfortunately, this is the reality of life and of being a homeowner. The only thing you can do to prepare for the unexpected or the inevitable is to have a smart budget and plan in place.
Ensure you save up for those rainy days by taking another look at your savings and life insurance plans. Is your family covered in the event of something happening to you? Are you saving enough to live comfortably in retirement? Can you afford for your washer to break down and need replacement? If the answer to any of these is no, then it may be time to revisit your finances and savings plan.