When buying a home, especially for the first time, there are many expenses to cover. That mortgage payment will likely be higher than your previous amount of rent. Property taxes, higher utilities, and homeowner’s insurance all add up. There’s also the need to save for things like maintenance and emergencies. These two often get put off in light of the more immediate expenses. However, owning a home is a long-term investment and many challenges can appear along the way. Take advantage of these tips about savings for emergencies from Plainfield IL real estate agent Jeff Gregory.
Is An Emergency Fund Needed?
Optimism is a wonderful trait, yet reality is important as well. The truth is that many things can derail your financial goals through the years. What happens if things go south at your company and you get laid off? Or what if you need to take a job out of state and need to move quickly? Health issues are always possible as well. Maintenance issues with your home or vehicle can also come as a surprise. A new roof will cost you anywhere from $1,700 to $9,000. This is where an emergency fund comes in. By saving even a small amount each month you can be at ease knowing that if something unexpected happens you are covered.
When To Start Saving
Young people will be wise to start saving right away, even before you own your own home. At least start an emergency fund when you have a significant investment that needs to be protected. Homeowners’ insurance will cover many things, however, not every potential problem will be taken care of. To start, put a small amount in your emergency fund each month. As your income grows, increase this amount. Once you reach at least three months of your total monthly income saved you can scale back.
What Counts As an Emergency?
Well, let’s start by discounting things that are “wants.” A new hot tub is not an emergency. Also, functional items that provide a practical benefit to your life would not count as an emergency. So, for example, buying that riding lawn mower to make mowing your lawn each week a lot easier is a good thing, but is not an emergency. Anything that you absolutely need in order to function that has been damaged or stolen would count as an emergency. For example, if your car that you use to get to work breaks down, use the emergency fund. If your insurance won’t cover an essential surgery, the emergency fund will help. Things that you know you can prepare for financially or have time to pay off would also not count as an emergency. It is never good to be too quick to use the emergency fund because that next unexpected event may be just around the corner.
For more help preparing for owning a home, or for help finding your next home contact Realtor Jeff Gregory today!