Home Maintenance & Repair Savings Rule Book

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For millions of American homeowners, this is a beautiful time of year: Tax return season.

While it’s only natural to have dreams of new cars, new wardrobes, summer baseball vacations and new grills, one of the smartest moves any homeowner can make with their return is deposit in a home maintenance savings account.

But exactly how much does the average American homeowner need to budget annually for home maintenance and repairs? Compelling factors like a home’s age and general condition can provide the best calculation, but one of the best, easiest and most simple rules of thumb homeowners can go by is the 1 Percent Rule.

The 1 Percent Rule

The 1 Percent Rule states that one percent of the purchase price of your home should be set aside each year for regular, ongoing maintenance. For example, if your home’s value is $300,000, you should earmark $3,000 per year for maintenance.

The good news is most U.S. homeowners won’t need to invest $3,000 annually for home repairs and upkeep. But the brilliance of budgeting by the 1 Percent Rule and putting a set one percent of your home’s value aside each year for home repairs will have you insured and covered in case of an emergency, high-dollar home repair project like a roof replacement (which runs $6,000 to $10,000 on average).

But The 1 Percent Rule isn’t the only smart home maintenance repair budget plan.

The Square Foot Rule

The size of your house is the basis of the Square Foot Rule, which advises budgeting $1 per square foot annually for maintenance and repair costs. For example, if you own a 2,500-square-foot home, budget $2,500 per year for maintenance and repairs.

The Square Foot Rule often provides better accuracy than the 1 Percent Rule because it’s directly related to the size of your American Dream. Just like the larger the business, the larger the payroll, the more square feet you are managing, the more you need to spend. However, one glaring inaccuracy of the Square Foot Rule is that it doesn’t account for labor and material costs in your area. And as we all know, the price of contractors in Iowa thankfully pales in comparison to the going contractor rate in New York City.

The Home Maintenance Savings Fund X-Factors

To get the best ballpark estimate of what you should save each year to keep up your home, know your home’s operating needs. Here are X-Factors to use when deciding how much money to invest each year for your home’s cost of living.

  • Age: Alas, not every home ages like a fine wine. The age of property plays a huge role as new homes built within the last 5 to 10 years need very little maintenance, while homes 10-20 years old need slightly more, and homes dating back to the 20th century could have major components (like a furnace or roof) that need to be replaced.
  • Weather & Location: You know your grandpa’s favorite saying: Don’t like the weather in Iowa? Wait five minutes, it will change. The Hawkeye State’s often unpredictable weather (see our five snows and counting so far this April) can put a hard freeze on houses, and leave them in need of major repairs without a moment’s notice. Homes in areas affected by freezing temperatures, ice storms, heavy snowfall, high winds, heavy rains (that’s all us) and other extreme weather conditions will experience more wear and tear than a home in Southern California.
  • Condition: Sure a 100-year-old Victorian is a classic, but by today’s real estate standards, it’s a fossil. Even century-old homes in pristine condition need annual upkeep (see the Chicago Cubs’ $550 million makeover of their beloved Wrigley Field). The older a home, the more impact a previous owner’s care or neglect will impact the home’s maintenance needs.
  • Single Family vs. Attached: By rule, single-family homes standing on their own require larger maintenance budgets since they have their own roofs, siding, gutters and landscapes. Condos and townhomes are smaller, attached and easier to maintain.

The Comprehensive Home Maintenance & Repair Savings Plan

There’s no universal rule that works for all homeowners, but by taking the best of the 1 Percent Rule and Square Foot Rule and adding in X-Factors like age and local weather, you can get a very good ballpark estimate on the annual cost of home maintenance and repair for your home.

First, take the averages of the 1 Percent Rule and Square Foot Rule. If one percent of your purchase price equals $2,000 and the Square Foot Rule equals $1,000, then your average is $1,500. Next, add 10 percent of each X-factor (weather, condition, age, location and type) that adversely impacts your home. For older homes in floodplains or areas that experience frequent freezing temperatures, increase the total by 30 percent: $2,000 x 1.3 would be $2,750 (or $229.16 per month).

Adding Operating Costs

Some homeowners like to also budget for ongoing home operating expenses (like a car, homes are always burning cash as fuel). Here is The Balance’s average home operating costs for U.S. homes:

  • Electricity: $1,368 per year/$114 per month
  • Gas: $984 per year/$82 per month
  • Water: $480–$780 per year/$40–$65 per month
  • Trash service: $240 per year/$20 per month
  • Sewer: $204 per year/$17 per month
  • Snow removal/Lawn care: $1,560 per year/$130 per month

Every home is different and has its own unique maintenance and repair needs. Knowing your home’s operational cost factors allows you to budget wisely for its needs both today and tomorrow.

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