Why You Need a House Fund
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Are the costs of owning a home breaking your budget? Learn how you quickly and easily start a house fund!
Buying a house is typically one of the most expensive purchases we ever make.
Right now the median price for a home sold in the United States is $226,300. If you live in cities like D.C, New York City, and San Francisco, you're looking at $545,000, $790,000, and $1,304,200
(Over here in Raleigh, the median price for homes sold is $257,200.)
Like I said, it's pretty pricey to buy a home.
You think with such a huge purchase we'd be really careful and methodical about it, but the truth is, we tend to rush in.
Rushing to buy tends to increase the chances that we get a home we can't comfortably afford.
Our budget is tight with little room to actually build up savings, much less invest. If something comes up (and it does), we're draining whatever savings we have.
However it doesn't have to buy this way.
Mortgage is Just One Part of Home Ownership
For us, home ownership has definitely been a blessing, not a burden.
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You two have to tone down your emotions and let go of some of the fallacies out there with home ownership if you want to come out ahead.
If you're looking to buy a home this year or so, I've shared our process on how to run the numbers.
This will help you know how much house you can afford (and still have some cash on hand to enjoy your life!).
Why You Need a House Fund
Today I want to talk about after you sign the papers. The day to day of home ownership.
For some reason, we tend to gloss over this, but even if you bought a new construction, there are expenses you need to budget for with your place.
I want to share with you a case a couple of years ago where we had to pull up an extra $2,000 to cover some work done in our house.
Forking Over $2,000 in One Week
When we were doing the home inspection for the house, we got a list of maintenance and repairs items we needed to do.
Being an older, most of it was expected and not emergencies, but we know we needed to shore up the basement wall before it became a problem.
Doing negotiations we had finances set up so we could get it done fairly quickly. The company came in, gave a plan along with an estimate.
Once settled into our place, we scheduled to have walled braced.
Fast forward to last week. The structural engineer came in to review and sign off on the plan. Turns out we needed an extra beam.
Whomp, whomp, but fine since we had some savings.
The ‘fun' part is that the older fridge we had decided that it didn't want to fridge anymore.
I tried to look around for replacement parts, but not in stock. So now we needed to get a fridge.
House Fund to the Rescue
Between the extra beam for the basement, the fridge, and the lawn chairs, we are $1,900 poorer (not counting the money for the rest of the basement repair).
While we're bummed about that all that money being gone, we're grateful that we had set up a house fund.
House Fund Not an Emergency Fund
Yes, the fridge dying is a problem, but I wouldn't call it an emergency.
When we bought the house, we took inventory of what would probably needed to be replaced.
The fridge was usable, but we estimated another year or so with it. (Unfortunately we were wrong.)
For us an emergency is losing our income or having an accident with the car.
As a rule of thumb we like to have three months of expenses in savings for an emergency.
To figure out an appropriate house fund, we took a look at project we wanted to tackle for the year.
So adding the fence is out to compensate for the additional beam and the fridge replacement.
Replenishing our House Fund
We like to have a certain buffer for our house fund. We'll be directing our tax refund into savings. It'll give us some peace of mind.
We're hoping that the rest of year goes a little more smoothly than this weekend!
If you're looking to get your house fund started, you can modify our emergency fund plan. It has tips on how to save and earn more money so you can build your savings faster.
Thoughts on Home Ownership
I'd love to get your thoughts, stories, and advice. Have you ever had a case of bad timing when it comes to home repair? What happened?
Did you have a house fund?
This article was originally published in March 2016. It has been updated in March 2019.
We bought our first home at age 23 and only left ourselves about $5000 total in the bank. It was a small risk, but it was a $114,000 home that we put 20% down on. We figured we could have several medium things fixed with $5000 or one large thing like the air conditioner, or we could handle a small emergency as we built up our savings. That worked out for us since the only think we had to tackle right off the bat was a broken water heater. Cost $150 for the new heating element and the labor to get the old, rusted one out.
With our new home in 2012, we already believed big time in cash on hand thanks to being self-employed, so we had a $5000-$10,000 emergency fund and a $10,000 house fund. In the last few years, we have had to switch insurances and stuff like that, so we’ve increased our emergency fund to $15,000 (a little more than our max out of pocket for health insurance in a year) and have kept up the $10,000 in padding for our rent house and our home combined. We refill it asap when we have to touch it.
We don’t have basements here, but air conditioners are pretty much necessities…and it would cost $7,000 or so to replace the rent house one or $10,000 or so to replace the two in our home.
Thanks Crystal for sharing your take. I think you have some great points about weighing your options.
Putting 20% is gets that PMI off your back and free up cash flow.
I also like how you have an emergency fund and something set aside for a house. Even with new builds things can come up and it’s nice to have some cash on handy to take care of it.