Investing in your home doesn’t end with your down payment. By continuing to put time and money in your home, you will help ensure it retains its value and even gains value. Using your household budget will help you keep up with mortgage payments while maintaining your home and improving your smart home.
This Redfin article provides tips and templates to help you build a household finances after you move into a new home. Whether you recently purchased a home in St. Paul, Minnesota or a condominium in Detroit, Michigan, there are some things to include when creating your household finances.
1. Consider monthly expenses
You probably realized that your responsibility as a homeowner is not the same as when you were a tenant. That applies to your monthly bill, and there are some that you may not know very well.
Utility: Perhaps you are used to paying for electricity, gas and the internet, but you may not pay directly for water, sewer or garbage collection. These are often billed every other month. If you have an oil furnace, you will need to fill the tank from time to time. Plan ahead to ensure that the occasional expenses don’t shock your budget. Property Tax and Homeowner Insurance: Property Tax is a tax you pay to the state or local government based on the value of your home. Homeowner insurance will protect you financially from future damage to your home or in the event of a visitor being injured in your home. Most lenders include these charges on their monthly mortgage bills, but if you don’t, you’ll have to deal with them yourself. Homeowners Association (HOA) Fees: If your home belongs to the HOA, you will need to pay the membership fees for maintenance and operational costs. These can be done quarterly rather than monthly, and often you’ll be involved in mortgage payments.
2. Start building an emergency fund
After moving into your new home, it’s appealing to spend a lot of money on furniture and appliances. But before you get caught up in shopping, make sure you have enough space in your household due to unexpected expenses.
Why are we needed an emergency fund?
When you own a home, it’s up to you to respond when things go wrong. It can cause major appliances to stop working, leakage of pipes, or be called air conditioners. A storm can tear shingles from the roof or knock down the trees. There are many emergencies where you can remove the chunks from your bank account, let alone car repairs, medical bills and income losses, as well as income losses that can make it difficult to keep up with your mortgage.
How much emergency fund do I need?
Most personal finance experts recommend that you secure three to six months’ worth of living as an emergency fund, or to secure around 1% to 3% of the value of your home.
That said, the amount of your emergency funds will depend on your situation. If you’re in a safer, paying job, three months might be enough. If your income is different or you are not reliable, aim for six months. New homes with all new systems and appliances are less likely to require repairs early, but older homes can cost more quickly.
3. Planning home updates, remodeling, and other goals
Investing in regular maintenance makes the home and its system work well. Put your money away from cleaning up the grooves, cleaning the carpet, or putting pressure on your deck, even if you only have time to make frequent appearances. See the Home Maintenance Checklist.
Strategic household improvements can also be rewarded in the long term. Not only will certain upgrades make your home more attractive and comfortable, but they can also increase the price when sold later. Examples include kitchen and bathroom modifications, floor replacements, and popcorn ceiling removal. Get more home improvement tips.
These projects may not be as attractive as the new hot tub, but at least for now, household goals may be smarter. It all depends on your home and priorities.
4. Create a home budget
First, keep in mind that household finances change over time. Your income may increase or shrink. You can add a family member or pay off your debts. Revisit your budget regularly to adjust and use spreadsheets to make updates easier.
Rule 50-30-20
One common approach to creating a budget is to use the 50-30-20 rule. This will direct 50% of your income to expenses, 30% to “hope” and 20% to saving or debt repayment. Usually, when expenses are over 50% of your total income, the “request” category is the first place to reduce your spending. See how spending compares to a 50-30-20 budget.
Financial experts recommend trying to keep your savings at 20%. This allows you to build an emergency fund fairly quickly and not only redirect your savings to your retirement account, but also provide holidays and special gifts. If you can’t afford 20%, decide what you can do.
Start with your income
Compile a pay stub or W2 or W9 statement from your employer, or a deposit document that will take a photo of your income. To get the monthly total, divide the annual total by 12.
List all costs
To be most convenient, this list should cover all the dollars you spend. Includes ongoing known expenses such as mortgages, utilities, taxes, insurance, car payments, cable invoices, and mobile phone invoices. List quarterly payments such as car insurance and garbage collection and split them up in 4 to get monthly payments.
Next, we list all other monthly expenses, including groceries, meals, gas, entertainment, and more. This includes minor cash costs, such as the cost of $20 to buy coffee per week. You will also explain the money you need to save based on the 50-30-20 rule and reach the monthly total of your expenses.
I’ll reduce the cost
Deduct monthly expenses from your monthly income. You need to reach zero or get quite close. Otherwise, I missed the cost list.
Armed with actual numbers, you can make changes to advance your target. Do you eat or order frequently? Black and white let you see how your daily expenses are added. If you want to spend your money elsewhere, you may decide to cook more meals at home.
The money you save can go towards goals like emergency funds, kitchen remodeling, debt reduction, vacations, retirement, and more.
Monthly Budget Template
Monthly budget templates make budgeting easier. You should be able to track every dollar and understand your spending habits so you can adjust it as needed.
There are also apps that allow you to easily track your spending. Some people can connect to their bank accounts, while expenses and deposits may be automatically entered. But starting with pen and paper or spreadsheets, you can easily see your finances as you know where you are standing.
