Figuring out how much you need to save for household maintenance and repairs is hard when you’re a first-time homeowner. You’re new to the house and homeowning in general; you have no practical experience to fall back on to figure this out.
If you aren’t sure how much you should budget, follow the 1% rule. It’s a simple calculation that helps you set aside enough money for repairs and maintenance.
What is the 1% Rule?
The 1% rule is simple. It recommends saving 1% of what you paid for your home for repair, replacements, and maintenance.
According to the Federal Reserve Bank of St. Louis, the average house in the U.S. sold for $549,900 in 2022. If you purchased your home for the same price, you should aim to save $5,490 every year.
These savings can cover everything from replacing the batteries in your fire alarm and buying new fire extinguishers to calling in a plumber for a leak or replacing your water heater.
What if Your Emergency Arrives Before You Reach Your Goal?
In the best-case scenario, you won’t have to replace any major appliances or repair parts of your home before you hit your 1%.
But you might not be so lucky. Depending on the age and condition of your home, you could have to replace a water heater or patch a leak in your roof before you reach your target.
How will you cover these urgent household expenses? If you don’t have enough savings or an available credit card, you can visit MoneyKey to learn about online loans. Researching legitimate online loans through MoneyKey can help you understand how these loans fit into your finances.
An online loan works as a stopgap for savings, but it doesn’t replace them entirely. You should continue to save towards 1% even if you apply for a loan online. That way, you’ll have money set aside, ready for the next emergency.
You Might Have to Tweak Your Savings Goal
If you’re constantly fielding an unexpected repair or replacement, it could be time to re-evaluate the 1% rule. You might need to save more than 1% if your home is old or a fixer-upper.
To help you set an appropriate savings goal, sit down and think about the following parts of your home:
- HVAC system
- Plumbing system
- Electrical system
- Roof
- Foundation
- Appliances
Consider the last time any of these major systems got attention. The time between upgrades could be a good indicator of the expenses in your future.
Try to anticipate how things can go wrong and customize your savings to reflect these expensive repairs. You might want to bump up your savings goal to as high as 4% if you have an older home.
Don’t Give Up on This Big Goal
It may seem like a steep goal to commit to in the new year, but it’s there to help you. With the right amount of savings socked away, no emergency will cause you to break a sweat.
A tree falling and breaking a window, your toilet overflowing and causing water damage, and a surprise leak — these unexpected issues will only feel like inconveniences, not financial disasters.
