How to afford expensive home repairs without having a heart attack or using debt

Your home is your most valuable asset. Like any asset, you want to maintain, protect and even increase its value.

Just like your car needs an oil change, your home needs regular repairs and maintenance. The problem is they’re not ALWAYS predictable but they always seem to be expensive.

Often people try to band aid repairs and end up regretting it. Why? Because they didn’t take the time to work out the math & energy cost. For example, you may think you can’t afford the long-term replacement and opt only for the six month fix for your water heater. Then a couple months down the road you now have water damage and a new water heater to pay for.

There are a few questions you can ask yourself when you’re deciding whether to pay for a repair / replacement in your home:

  • How long are you expecting to be in the home?
  • What is the expected lifetime of appliance?
  • What are the expected energy efficiency savings?
  • Am I considering moving soon?
  • Will this make my listing more attractive / increase the value of my home?

If you believe that your home is an asset worth protecting, we’re going to tell you exactly how to pay for repairs so that you don’t have a heart attack and so you don’t have to go into debt.

The secret here (after you’ve gotten on a zero-based budget) is to open up a home maintenance account and start putting money into it. TODAY!

Related: 5 reasons why you need a budget right now

As soon as you do that, you’ve got what we call a sinking fund.

A sinking fund is a savings account with a purpose. Unlike your emergency fund, a sinking fund is not for emergencies. It’s also not your investment account where all your money is piling up so you can retire and live generously later.

No, a sinking fund acknowledges that there are certain (often reoccuring) expenses that come up annually or biannually that are too big to afford in just one month.

Sinking funds PLAN for this.

As we’ve said before, some examples of sinking funds are:

  • Christmas gifts
  • Travel
  • Home maintenance
  • Car maintenance
  • Taxes
  • Insurance premiums

Related: What is a sinking fund and do you need one? Or five?

In this case, there are a few different types of home expenses that you’ll want to save for:

  • Maintenance: duct cleaning, water heater flush, etc
  • Repairs: repairing a running toilet
  • Replace: HVAC system

The cost for these things can scale up or down pretty wildly. What you DO know, for sure, is that one or more of them will come up for you as a homeowner.

In order to have some peace of mind, we suggest you open up an account, name it home mx or whatever fun version of that you can think of and then start putting some money in it every paycheck. This will go in as a line item in your budget. You can even make the transfer happen automatically so you don’t have to think.

Once you get that going, you might want to take the time to see what a realistic amount you need to save up is. First, let us tell you about the 50% rule:

50% rule= If an appliance is more than 50% through its lifespan and if the cost of one repair is more than 50% of the cost of buying new, you should replace rather than repair.

Now, think about the items you have in your home. This includes things like your dishwasher, water heater, ac unit and more. What sort of lifespan do they have? How far are you into those? Do you have warranties? Do you know about upcoming repairs?

All of these questions will inform your decision on how much to set aside each month (along with the “wiggle” room in your budget). Here are some example costs to replace:

So, if you are saving for something specific there is a specific formula you will use:

Total cost % time in months = monthly savings.

For example, if you know you have six months to save up for a new water heater you’ll want to get an estimate and then start setting aside that money. $3000 / 6 = $500 monthly.

61 | How To Afford Expensive Home Repairs Without Having A Heart Attack Or Using Debt (Savings Money & Debt Free Living) Financial Coaching for Women: How To Budget, Manage Money, Pay Off Debt, Save Money + Paycheck Plans

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