Have you finally bought your new home? You must be quite excited about the milestone. As you start the next journey of your life, you need to think about proper budgeting so that you can live comfortably with facing financial struggles. Every new homeowner needs to learn how to budget. The following steps should help.
Understand the budgeting basics
You need to use the 50/30/20 approach. This forms a solid foundation for budgeting. According to the approach, 50% of your total income should go towards your fundamental needs, while 30% should go towards wants. Needs are the crucial things you cannot survive without while wants are things that enhance your lifestyle but are not mandatory. The remaining 20% should go towards saving and paying any of the debts you may have incurred in the past. Sticking to this approach can help you maintain a fulfilling life.
You can make use of the budget calculator for you to determine how salary breaks down. Owning a home comes with some additional expenses that you should consider. Try accounting for the new regular expenses that you have to take care of. Apart from paying for electricity and water bill, you have to settle the costs of real estate taxes. If you stay in a planned neighborhood, you can also incur homeowners association costs.
Budget for home upkeep and maintenance
Regardless of how long you intend to reside in your new home, you should keep your home in the best condition. Repairs and making the necessary updates can be quite expensive. That is why you need to budget for them properly since things are prone to damage after extended use. Try to set aside at least 1% of the home value for general upkeep. If you bought a fixer-upper, you might have to deal with more repairs compared to purchasing a new home. Proper planning for this beforehand can help.
Protect your investment
Even if you bought your home without for a mortgage, you should not underestimate the importance of homeowners insurance. Since anything can happen, you have to including paying for premiums against this insurance policy. Look for fast homeowners insurance quotes online and identify the right insurer that can help you save. Protecting your investment as early as you purchase it can prevent you from wasting more money in the future.
Revisit your life insurance and savings
After making a recent purchase, it is always important to review your savings account and life insurance policy. Your emergency fund should have enough money that can sustain you for at least three months. If you took some money from your emergency fund to buy the home, you have to think of ways to return it. Aim at getting the best value from your life insurance policy.
Think about your retirement contributions and evaluate if they are enough to cover your household expenses even after retiring. If not, you need to start allocating more to this cause so that you don’t struggle during your retirement years.