Whilst many people sensibly have an ‘emergency’ fund for unforeseen expenses, when you get on the housing ladder, it’s pretty well essential to get a firm fix on your day to day expenses. Having organised savings plans is key to successful home ownership since it can be a costly experience at times. Below are a few essential tips for budgeting that will keep both your property and personal finances in good shape.
Allocated around 1% of the value of your property for maintenance - every year!
Whilst opinions and figures may vary, we suggest that you save around 1% of the market value of your home, per year, for essential maintenance.
For brand new houses, you might get away with less – although as time goes on, things do wear out. For example, cooking appliances have an average life span of 8 to 10 years as do central heating boilers.Determine your new disposable income
If you have moved from renting to owning your own home there will be additional monthly outgoings to consider, besides your mortgage, such as buildings insurance. You might also have taken out additional policies such as life insurance, income protection or even plumbing insurance.
Once you taken care of your obligated - monthly payments and maintenance savings – as suggested in point 1, you are technically left with your disposable income. From this, you need to distinguish between your ‘needs’ and ‘wants’ to better adjust your spending plan.
It might be that you have the capacity to funnel more funds into your home maintenance savings OR you could look more closely at your long-term requirements such as putting more into your pension.
You can have any number of saving funds such as a ‘Christmas’ or a ‘holiday’ fund. This enables you to budget much more effectively, ironing out ‘peaks’ and ‘troughs’ in your spending or preventing the ‘feast or famine’ approach to your living standards and personal cash-flow.
Plan regular budget reviews
Take a good look at your costs and spending at least twice a year. This will enable you to get a better idea on the things that you might be spending too much on OR in some instances, too little! Don’t simply put up with charges from certain suppliers – like utility companies. Compare the market and don’t be afraid to drive a hard bargain; it’s a competitive world out there!
If you can save more, then do it; one never knows what life might throw at you, Covid 19 being a perfect example!
Keep an eye on your mortgage and the amount of equity you are building
The mortgage package you started with might not be relevant to your present circumstances – making you pay more out in mortgage payments than you need to. As a proven - reliable mortgage customer with a higher degree of equity, you might well be able to get a better interest rate with lower monthly mortgage repayments.
It could also be the case that you originally took out a much longer-term mortgage deal to make monthly payments more affordable. Once again, with a few years under your belt and an amassed amount of equity, you might want to consider shortening your mortgage term. This could save you vast amounts of money, lost in interest on repayments, in the long-term.
Prior to considering any changes to your mortgage, you need to look carefully to see if there are any redemption penalties and to then take an overall view.