Are You Spending Too Much on Your Home?
I recently wrote about how home renovations can cause your monthly housing expenses can cause your housing expenses to tip over 50% of your take-home pay. The cost of the renovation or remodeling can and likely will cost more than you expect. In addition, you will likely spend more than you think on other housing expenses which can negatively impact a fragile budget.
This article will discuss housing expenses that can potentially derail your budget whether you decide to spruce up your home with or without major home renovations.
Housing Expenses Can Break a Budget Without Renovating or Moving
Housing is one of the top three largest monthly expenditures. When I ask clients about their housing expenses, it frequently only includes mortgage/rent, monthly HOA/maintenance fees, and real-estate taxes. And they likely include utilities such as heating, cooling, trash removal, and water.
However, there are many more monthly, quarterly, and yearly housing expenses. This is where you can run the risk of overspending your budget.
Discretionary Housing Expenses Can Cause Serious Damage to Your Budget
This is not intended to be an exhaustive list of housing expenses. It’s more to help you think about discretionary housing expenses.
Each added expense should be considered on its own merit. However, in order to prevent an issue with your monthly cash flow, you will need to look at the total amount you will spending every month. This means you should have a set dollar amount, i.e. a budget you are willing and able to spend.
After a renovation or remodeling
Now that you are have renovated your home, it’s likely your furniture and furnishings no longer fit. It may be, they are not the right size or color for the new room(s). Maybe your taste has changed from style to another.
No matter what, you are likely going to be purchasing all sorts of items. The list includes furniture, curtains and window treatments, throw pillows, accent pieces, small furniture to fill in newly created space, paintings and wall-hangings, and possibly sculptures. If you set aside extra cash for these purchases, that’s great. It’s more likely, however, that you have borrow the money and now have an additional monthly expense until it is paid off.
If the renovation included updated or extra bathrooms, then similar choices need to be made such as new towels, extra soap, candles, and accent pieces to make them welcoming.
If you home is now larger than before, not only will your monthly utility bill increase, but your housekeeper has more space to clean. This same goes for your lawn service. After renovating, you may have nicer grounds and more to maintain. It’s likely this cost will increase.
No renovation or remodeling required
There are all sorts of additional housing expenses that we add to our homes. We may decide it’s not as nice as the neighbors’ house, it’s lifestyle creep or feel you deserve it for working so hard. Before choosing any additional expenses, consider whether you should be setting the aside money instead for emergencies or retirement.
Here are few examples of these type of expenses:
- Fish – fish tanks indoors or an outdoor pond
- Pools – indoor and outdoor
- Upgrading kitchen appliances
- Outdoor living – grills, tables, chairs, lounge chairs
- Entertainment systems – including indoor and outdoor audio and visual. Some may have monthly fees and other purchases will be one-time.
- Gym equipment
Whether you renovated or are updating your home, think about what you can spend based upon your budget. Do consider each purchase carefully and then in total. If the total amount is more than you expected, then pare down. Avoid over-committing your money. Better yet, if you want to make changes to your home, save for it, so it does not impact your budget at all.