There are a myriad of rules and tips out there for homeowners. Sorting through all the advice can become a little overwhelming. How do you decide which tips to follow and which to ignore? We know one thing for sure, the most important thing a homeowner can do is have an emergency fund! According to Dave Ramsey, “The reason to have an emergency fund is simple: you don’t know what’s going to happen in life. Money magazine states that 78% of us will have a major negative financial event in any given 10-year period. You need to have cash ready to help you survive if you lose your job or your heater breaks in the dead of winter.”
While everyone should have an emergency fund, it is particularly imperative for homeowners. With homeownership comes hundreds of new opportunities for added costs; some small like a clogged drain, and some large like a new roof. Angie’s List states that the average price of a new roof is $12,000, and can run as high as $25,000 plus for higher-end roof types. Without a substantial emergency fund, a homeowner dealing with an unexpected expense such as this could go into debt in an instant.
How many Americans are fully prepared for a serious financial setback? According to Bankrate, “When asked about their emergency savings, 29 percent of Americans reported they had none, according to a survey that accompanied Bankrate’s Financial Security Index for June. That’s the highest level in five years of surveying and up from 26 percent last year.” These statistics probably sound all too familiar. Bankrate also maintains that, “Only 22 percent said they had enough to pay for at least six months of expenses, which is generally considered by personal finance experts to be the amount needed for a satisfactory cushion.” On top of a house, most homeowners have expenses related to kids, living, transportation, bills, groceries, medical expenses . . . we could go on and on! The point is, if you have even half of those financial factors to deal with, saving 3-6 months of expenses, let alone $1,000 can feel like an insurmountable task.
Starting your savings from scratch can be even more overwhelming. The key is to be patient and prepare for small setbacks. While on your journey to bulking up your savings, you will probably encounter a clogged drain or an ailing appliance. Don’t let those small steps backward discourage you. Break up your goal into baby steps, and build in a reward for every step of the way. Not only will your long term savings goals feel much more attainable when broken down into steps, you will also get a motivational boost each time you complete a step. And don’t forget to congratulate yourself on your progress!