If you thought down payment and closing costs were all you'll pay for when buying your new home, think again. Here's how you can manage your expenses
So you’ve finally purchased a home! After all of the months of searching, and another few weeks poring over endless paperwork, you have been given the keys to your beautiful home. Now all you have to do is buy new appliances, get some new furniture, bedding for the guest room, hire a landscaping service...and the list goes on and on. Just when you thought you had spent all your money on your down payment, now is the time that the expenses really start to add up. After you buy a home, you suddenly realize how many things you “need” in order to make your home function. But now is the time to be careful with your spending and find a way to live within your means. Here are five essential financial tips for new homeowners.
#1. Make Strategic, Planned Purchases
Because you now have so many holes that need to be filled (furniture, new lighting, new art work, etc.), it can be easy to get carried away and just throw everything in the cart. This type of spending is not sustainable and will have your credit cards maxed out in no time. Instead, save up for the important things you want to buy. Plan out, and spread out, your purchases. Don’t fall victim to convenience purchases or paying more for something because you want it now. Shop around in store and online and make sure you get the best deal.
#2. Update Your Monthly Expenses Budget
The first few months in a new home can be a little nerve wracking, since you have no idea what your outgoings are really going to look like. While you probably have some sort of budget already in place, now is a great time to revisit your numbers and adjust things accordingly. Your mortgage payment is probably more expensive than your previous rent payments. Your utility costs will probably increase due to the change in size compared to your last home. In addition to mortgage and utilities, also keep an eye on your gas budget or other transportation budget, as your distance to work may have changed. Keep an eye on your expenses for a few months and use the average amount to determine how much to allocate to each category going forward.
#3. Set Money Aside for Major Annual Expenses
As part of the above point, now is the time to allocate funds for important expenses that you know are coming up. Each month, set aside money for annual property taxes, and any annual homeowner's association dues or similar fees. These big-ticket expenses can really land a blow to your budget if you’re not preparing for them in advance.
#4. Budget for Inevitable Repairs and Maintenance
Now that there is no landlord to call when things break, it’s important to set aside money to pay for maintenance and repairs on your home. While some repairs may be covered by home insurance, some won't be. The amount you set aside doesn’t have to be much, as even the smallest amount will add up over time and will help cover some of the cost of your next repair. It’s good idea to set up a new savings account and siphon the money into there, so you’re not tempted to spend it. An important thing to take into consideration is the age of your home. Older homes are more likely to need more frequent repairs, so keep that in mind as you decide how much to allocate.Even in strata units, where your strata fee will cover most of the building’s maintenance, you still need to consider that there will likely be in-suite repairs that you’ll be on the hook for.
#5. Create an Emergency Fund
In addition to the above, and although it may seem like you have more important uses for your money, remember the importance of creating an emergency fund. You never know when you’re going to need access to extra money. Whether your furnace breaks down in the middle of a snowstorm, or your basement unexpectedly floods, or you’re out of work for a few months, it’s essential to have a little money to fall back on. Contribute whatever you can to an emergency fund and help protect yourself from the unexpected. Again, create a new bank account – ideally one that offers a decent rate of return – and ensure you can access the money with a few days’ notice.