When you make your budget in retirement, you would never forget to include your main housing expenses, such as your mortgage, property taxes, and utilities. But do you have enough set aside to cover repairs and routine maintenance?
If you're like many homeowners, the answer is probably no. In fact, a 2018 study by Liberty Mutual found that a whopping 80% of American homeowners have no budget or plan in place to deal with home maintenance issues. What's more, it's not just cash-strapped first-time homeowners who aren't prepared for maintenance. The study found that Baby Boomers are the least likely to save for home maintenance or repairs.
"People can be caught off guard by the true cost of home or car ownership," DIY expert and television personality Chip Wade said in a statement about the Liberty Mutual study. "After accounting for utilities, property taxes, and insurance, you also need to budget for ongoing maintenance and big-ticket repairs like a busted furnace, a leaky roof, or even new tires."
Tips from the experts
So how much do you need to budget for home maintenance? The experts at Glasshouse, a home maintenance service based in California, offer some useful guidelines.
"Experts recommend setting aside anywhere from 1% to 4% of the home's purchase price each year for maintenance," says Glasshouse CEO and founder Shannon Bloemker. "That's a significant sum and won't be needed every year, but it prepares [people] to cover big-ticket items with little or no impact on your budget when the need arises."
For example, if you own a $300,000 property, that means you need to budget at least $3,000—and as much as $12,000—to cover repairs and maintenance every year. Another rule of thumb says to budget $1 per square foot per year, according to personal finance site The Balance (thebalance.com). That means you'd need $2,500 per year to keep a 2,500-square-foot home in good operating order.
Of course, these estimates will vary based on where you live, the age of your house, weather, and other factors. And as you get older, you may want to begin outsourcing some projects that you used to do yourself, which could further increase the amount you'll need to spend on maintenance.
The 1% and square footage rules of thumb also don't take into account things like updating your kitchen or bathroom for cosmetic reasons. Sure, the shower or the stove may still work, but how long can you live with dated appliances and fixtures? According to HomeAdvisor's 2018 True Cost Report (homeadvisor.com/r/true-cost-report), homeowners spent an average of $6,649 on home improvements in 2017, with Baby Boomers outspending Millennials, GenXers, and the Silent Generation by 32%, 14%, and 10%, respectively.
Shelling out several thousand dollars every year on home maintenance isn't appealing. But if you put off routine maintenance or cosmetic updates, you could end up paying more in the long run. What started as a small repair to your air conditioning system could cost much more when the entire system needs to be replaced. And when you want to sell your house, you may have a hard time attracting buyers if the property hasn't been updated in years (or decades).
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