Congratulations! You’ve become a homeowner. Purchasing a home is a longtime financial goal for many people, and it often takes years to accomplish.
After you’ve met the goal of home ownership, it’s easy to wonder what to do next. First, take time to celebrate your accomplishment and get settled into your new home. But then there are plenty of important financial steps to take next. Here’s a look at four valuable financial actions to consider after buying your first home.
Create a fund for maintenance and repair
Purchasing your home is a huge investment, but closing day was only the beginning. In order to protect your investment, you have to keep your home maintained and all its systems in good working order.
A good rule of thumb is to expect to spend about 1 percent of the value of your home annually on maintenance and repair. For example, if your home is worth $400,000, you should expect to spend about $4,000 per year on it. During some years, you may not need to spend that much, but in other years, you may need to spend more. Aim to set aside 1 percent just so you’ll be ready.
If you don’t have any money socked away for your home, start building a home maintenance fund now. At some point, your appliances, plumbing fixtures, heating system, roof or landscaping will require attention. By starting right away, you’ll be prepared to cover those inevitable costs for home repairs and maintenance.
Update your insurance policies
You probably recently acquired homeowner’s insurance when you purchased your house, but that’s not the only insurance policy to think about. For example, if you now have a mortgage payment, it’s a good idea to update your life insurance policy to cover your mortgage in the event of your untimely death. If you don’t already have a life insurance policy, having a mortgage obligation is a good reason to get life insurance. Otherwise, the people you leave behind would be left with your mortgage bill as well as their grief.
Also, be sure to alert your health insurance provider of your move. If you’ve moved to a new state or possibly even a new county, your health insurance coverage may change.
Revisit your budget
Most likely, you learned to master the budgeting process while you were saving up for a down payment and getting your finances in order to purchase a home. Now that you’re a homeowner, budgeting will remain important, but you may need to tweak your monthly budget in some key ways.
For example, make sure your monthly budget includes line items for your mortgage payment, home insurance, property tax, and savings for home repairs. If you have plans to make updates or buy new furnishings for your home, you’ll need to budget for those items as well.
Reexamine your other financial goals
After meeting a major financial goal, such as buying a home, you’re often left with extra funds in your budget. Because you’re no longer saving for that down payment on your home, you may be able to apply more money toward other financial goals.
Take time to consider the other targets you want to hit with your money. For example, maybe you have a goal to save for a child’s education. Perhaps you plan to purchase a new car next year, or go on a special vacation. If you’re not already saving aggressively for retirement, that’s an important financial goal.
Once you’ve established your other financial goals, start prioritizing them and determining the best way to approach each one. Remember, now that you’ve accomplished one of the biggest financial milestones—buying a home—you’ve proven that you have the discipline and financial fitness to plan for and meet big goals. And now you’re ready to tackle the next one.