So you’ve finally, finally got the keys. Congratulations! With this recent purchase out of the way, there’s no better time to take another look at your finances and see where you should aim for the future. Here are some financial tips for after you buy a new house.
Be Prepared for Emergencies
Are you prepared for an emergency? If a natural disaster happened right now, would you have supplies? If your sink flooded your house while you were gone for the weekend, would you have money to stay in a hotel for a few days? If your car broke down, could you afford to fix it? You have to ask these questions, even when your pockets are feeling a little empty after buying your new house. It’s not fun, but it pays to be prepared. Start an emergency savings fund right now, and track your progress towards whatever goal you want to set. You should aim for three to six months of living expenses at the very least.
Stop Spending Money
Yes, you read that right. Commit to a spending freeze. This is where you commit to a specific amount of time (typically a few months) where you and your family will not purchase anything beyond necessities. Snack foods? Nope. A new sweater? Sorry. A weekend trip to the Bahamas? Certainly not. The money that you would usually dedicate to “extras”? Save it. Put it in your emergency fund. Having a house is like having a child – at some point, something is going to go wrong, and it’s on you to fix it. Save yourself from being stranded up the river without a paddle by adding a little more than usual to your emergency fund for a few months. You may discover that you can live without your morning coffee after all.
Shop With Money, Not Emotion
Even if you’re on a spending freeze, you still have to eat and feed your kids. For most households, the grocery budget is a whopping 20-30% of the total family income. Keeping that in mind, you could probably afford to cut that down a little – and your new best money saving strategy is as easy as eating a sandwich. Yes, all you have to do is eat something before you go to the grocery store. This sounds bizarre to include in a series of financial tips, but in studies, it can make a HUGE difference in a family’s grocery spending. It has been proven that families who routinely make sure they’ve eaten before they visit the grocery store only spend between 10-15% of their total family income on groceries. That’s a lot less than those who go hungry! To stretch your grocery money even further, walk through the aisles with a shopping list – and do not deviate from that list! Take all the money you saved and put it in your emergency savings. (By now, you should have a pretty good amount of money in that thing!)
Keep it Simple
Okay, so you’ve successfully saved up $1,000 in your emergency fund and you want to go celebrate. So you take the family out for dinner and a movie – but wait, lets do a little math here. Say you have two kids. Dinner would likely total to around $70, and the movie (plus popcorn) for four will be another $50 or more. That’s at least $120 that could have gone in your emergency fund! Instead of going out on the town, see if you can recreate your celebratory night out at home. Simple pleasures are the best when you’ve just bought a house, and the best thing you can do during that new-homeowner period is to stay in your new home and enjoy it – not to run all over town spending all your hard earned money. Instead of ordering out, make pizza at home. Watch a movie on Netflix instead of going to the theater. Make coffee at home instead of going to the Starbucks. It can make a huge difference!
Say No to New Debt
We know that buying a new home can put folks on a financial high, thinking they’re so much better off than they originally thought – but don’t go crazy. You don’t need a new car to accompany your new house. No, you should not finance another loan, and you don’t need another credit card. If debt knocks on your door while you’re celebrating your new house, don’t answer! Only take on new debt when you’ve lived in your new house for at least a year, if not more. You need to know what to expect from your house in each season before you take on more debt. You don’t want to finance a new vehicle and then find out two weeks later that your garage floods every time it rains, or that your pipes freeze at the slightest hint of snow. Go through a full calendar year with your house, so you know all of it’s seasonal quirks, and you’ll be more financially comfortable if you decide you really do need another car.
You Don’t Need New Furniture
While we’re on the topic of new homeowner financial highs… Your home may be new and shiny, but your regular old comfortable furniture is just fine. You have years to live in your home – don’t spend $20,000 the week after you move in on new kitchen appliances, a new bedroom set, and an entirely new living room set. Buy new furniture over time, not right away. It’s understandable to want to create a space that’s truly yours, and to abide by the philosophy “out with the old, in with the new”, but it’s not a good idea as a new homeowner. If you really want to upgrade your furniture, consider reupholstering or repainting the furniture you already have. It will feel new and scratch that itch for new furniture without breaking the bank.
Repairs? Fork Out the Cash.
Now that we’ve told you everything you shouldn’t spend money on as a new homeowner, here’s something you absolutely should spend money on – needed home repairs. No, we don’t mean updating the lighting in the bathroom to something that matches better or putting in a new microwave that has more features . We mean true repairs, such as electrical wiring issues, water heater updates, replacing broken appliances, and replacing unsafe systems. These are the scenarios you’ve been hoarding all of your money for! If the roof is leaking, fix it. Don’t let your drive to avoid spending go too far. You’ve spent thousands, if not tens of thousands of dollars already to get into this house – don’t let that money go to waste by putting off needed repairs in your new home. Don’t know how much to save? Aim to put away about 1% of your home’s principal value in savings for repairs every year. That sounds like a lot, but with how much money you’ve saved so far, it should be no problem for you!
Revisit Your Budget
We assume that before you got the keys, you made a budget for your new mortgage payment. At least, we hope you did! Now that you have the keys and you’re in the home, revisit that plan. Some things may be different than you thought. You may have estimated too high on the monthly electric bill. It’s worth looking at one more time – you might be able to pocket a little bit more money into your savings account. It can be stressful to keep thinking about finances after you’ve finally closed up the process of making the biggest purchase of your life, but do it anyway. It’s essential and you can’t afford to skip it. Remember to leave room in your monthly budget for regular, scheduled additions to your emergency fund – that shouldn’t just be added to when you find some extra money here and there. The coins under your couch cushions won’t replace your roof!
Review Your Retirement Plan
If your budget changes at all from how it was before you bought the house, you need to review your retirement plan. 64% of Americans are on track to retire with no money. Don’t join their ranks. Compare your 401(K) to your new budget and make sure the amount is sustainable (or if you could increase it at all). If you don’t have a 401(K), look into getting a traditional IRA or a Roth IRA. If you don’t want to work for the rest of your life, now is the time to get on top of your retirement plan, and there’s no better time to do that than after you purchase your new home.