Financial Steps to Take After a Home Purchase
Buying a home is an exciting endeavor. Once a home is purchased, the moving trucks have driven away and the excitement has faded, you may ask yourself; “What is next?” Buying a home is a big financial step with definite financial ramifications.
As a new homeowner, here are some financial items that you need to re-evaluate:
1) Readjust the budget
Whether you are upgrading your home or downsizing, your budget will be affected. If you’re upgrading, your fixed expenses will increase; mortgage, heat, electric property taxes. You’ll also have to account for the extra space and the need/desire to fill that space with furniture or other household items. These items will take away from your cash flow and you’ll need to account for them. I
If you are downsizing, then you’ll need to consider what to do with the extra cash flow. Be sure to have a spending plan or better yet a savings plan for the extra money.
Either way, monitoring your new cash flow for the first six months is a good way to get a handle on how the new home has and will impact your cash flow moving forward. Make sure you’re flexible enough to many any necessary adjustments.
2) Set aside money for house repairs
Unlike renting, you’ll have to start fixing issues that come up with your new house. The general rule of thumb is that you will spend on average 1% of the value of the house per year on repairs. The 1% rule doesn’t mean you’ll spend exactly 1% each year on home repairs, but it’s good to keep that in mind. Most people do not account for the many trips to Home Depot in their budgeting. Be aware that issues will come up and make sure your emergency fund is there in case you need it.
3) Re-evaluate P+C Insurance
If you’re buying a new home, you’ve most likely already purchased homeowner’s insurance. With new homes come new risks and liabilities. Someone can get injured on your property or your teenager can throw a party that can have significant consequences. Make sure that your homeowner’s insurance has good liability coverage limits. This would be a good time to consider an umbrella policy as well. Umbrella policies add a layer of liability protection in conjunction with your home and auto policies. If you haven’t yet, considered consolidating all three with one carrier to take advantage of any available discounts.
4) Make sure your income is protected
If you are ever too hurt or sick to work, you can’t call up your mortgage company and ask them if it’s alright to hold off on making your mortgage payments for a few months. You may get disability coverage through work. If you do, be sure that the coverage will be enough to pay off your monthly expenses. If not, there are supplemental disability insurance policies that you can buy that work with your company’s disability insurance. If you don’t get a policy through work, consider getting one as an individual.
5) Do You Need More Life Insurance?
Talking about dying is never fun to talk about. If you bought this home with a significant other, odds are you considered both of your salaries in determining if you could afford your home. If one of those salaries goes away, would the other person be able to pay the mortgage? Life insurance is a good tool to cover excess debt.