For most people, their largest asset is their home and the contents inside of it. But many people don’t spend enough time managing their home nor do they understand the various financial implications of not managing it. Ignoring the management of your home can increase your annual costs to maintain and improve it, slowly lose its resale value, and put you at risk. Let’s go over some of these examples.
Budgeting annual maintenance for your home usually ranges in between 1% and 4% of the total value. The older the home is, the higher end of the annual maintenance spend is required. But many people forget to do the little things, like drain the hot water heater, change the air filters, and clean the gutters.
Not doing these things causes equipment to break sooner, and often times cause more collateral damage that even increases fix it costs and makes the home unsafe and unhealthy. It is a best practice to setup a re-occurring maintenance calendar to track these items and costs to stay on top of them.
Most homeowners are also under insured because they don’t know the itemized value of their possessions. Their insurance policy limit for the contents is probably less than the total items in the home, and many items require special riders to be insured. A best practice is to keep a digital home inventory of photos and values stored away from the home in a secure internet cloud environment.
Home improvement projects are another area where homeowners don’t take enough care to manage these costs. Many people take on kitchen, bathroom, roofing, landscaping and various other projects. Usually they have never managed one before, so they end up not knowing all the items required and go significantly over budget and forget to track the costs for a future tax basis. It is a good idea to keep a budget and save all the documents and photos for tax and resale time in the future.
People also lose track of the different values of their home. The purchase price of the home is different than the tax assessed value, and different from an appraised value, and very different from an insured value. Tracking and understanding the financial and risk implications over these different value is important for homeowners in managing their home.
Home Finances Solution
There is a new market emerging for personal finance solutions that are focused on managing these various aspects of the home. HomeZada is one of these solutions that allow you to manage everything about your home in one place, from your desktop, tablet or mobile device. It combines best practices, a property calendar, dashboard analytics, a recommendation engine, and data storage all in one solution. You can also manage more than one home as well as share your account with a spouse for estate planning purposes.
Managing your home can be like managing a portfolio of investments where you need to look at the various categories of where your money goes. How are you managing your home?