How Much Savings Should I Have After Buying A House

Dated: August 7 2017

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How Much Savings Should I Have After Buying a House?

Owning a house requires a continuous investment of money.

Home ownership is a continuous and expensive investment. Besides the money you've saved for a down payment and closing costs to buy a house, having additional cash set aside will help prepare you for what comes after. Along with mortgage payments, property taxes and home insurance, you will need cash for routine and periodic maintenance and repairs.

Home Maintenance Costs

When you own a home, repair and maintenance issues can occur at any time. Being prepared by having some extra cash on hand can help make an unexpected emergency seem less overwhelming. An article by Joseph Gyourko, professor of real estate, finance and business economics at the Wharton School, points out that the average homeowner spends 2.5 to 3 percent of a home’s value each year on upkeep and maintenance. Therefore, it’s a good idea to set aside a sum of money each month so you will have it when your home needs basic repairs or a major investment like a new roof or furnace.

Emergency Fund

A general rule of thumb when it comes to covering emergencies is to set aside at least six months’ worth of your after-tax pay in savings, notes David C. Jones, president of the Association of Independent Consumer Credit Counseling Agencies. Once you have some rainy day savings, make it a point not to touch any money you have in that fund for anything other than a real emergency. Tap into your emergency savings only if you can't cover an unexpected expense with funds from your regular household budget.

Budgeting Savings

While some families can save more money than others, any amount of savings counts. A practical way to get in the habit of putting money aside is to take a careful look at your household expenses to determine how much you can realistically save each month. If you have to, start small, saving enough to cover the bare necessities for one month. Once you get that much aside, you can work on increasing your savings to carry you for a longer period of time in case of an unforeseen event such as illness, a job layoff or major home maintenance job. You should also take an inventory of the conditions of major household appliances and the home's roof and heating/cooling, plumbing and electrical systems. Getting a better idea of how much longer each should last can help you save for repairs and replacement.

Savings Accounts

Putting money in a bank savings account might not earn you a high return, but it's a safe and convenient place to keep emergency funds. For one, your funds are federally insured for up to $250,000. In addition, a savings account gives you quick access to your cash when you need it and there are no penalties for withdrawing money early. With a regular savings account, you can also have a set amount of money each month automatically transferred from your checking account.

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