This video post is the third of a four-part series.
Last week, I introduced the concept of a Budget Buster, which is any irregular expense that I fail to plan for. These are't true emergencies, but rather expenses that pop up to surprise me, even though I should have easily seen them coming.
This week, I'm concentrating on the largest budgeting category for these surprise expenses: home ownership. When looking for housing Budget Busters, those of us making the transition from renting to home ownership need to be especially wary; lack of experience leaves us exposed to a barrage of these expenses in the first few years.
Most of us are familiar with paying a mortgage (including interest), property taxes, and homeowner's insurance. In fact, many times these are lumped into a single monthly payment by your mortgage or processing company. But in addition to these routine costs comes a host of irregular — but nonetheless inevitable — expenses.
In this video, I concentrate on three main areas where Budget Busters strike hardest: routine maintenance, repairs/improvements, and transactions costs.
Here's a run-down of the contents:
- Recap of the definition of a Budget Buster [0:12]
- Defining routine maintenance vs. repairs/improvements [1:05]
- Brainstorming examples of routine maintenance [1:45]
- Brainstorming examples of repairs/improvements [2:20]
- Hidden expenses related to buying and selling a home [3:25]
The enormous costs associated with the repairs and improvements — remodeling a kitchen, replacing a furnace, tearing out a tree — are apparent. However, the combined costs of routine maintenance — yardwork, cleaning carpets, painting a room — can add up quickly too.
As we talked about in part one, the key to planning for these Budget Busters is embracing the fact that irregular expenses will almost always be more than we expect. It's been my experience that just when I think I have it figured out, something new comes along to bust me! I've learned the best strategy is to overestimate my costs to ensure a cushion.
I know there many of you have owned homes for decades! Which expenses have shocked you most over the years? Which ones should those of us who are new to home ownership watch out for?
Note: We've heard you on the video posts. There's one more scheduled for next week, but after that they'll only be an occasional thing. Thanks for the feedback!