Here’s How Much to Save for Home Maintenance Each Year

Hi! So, you’ve become a homeowner. Do you wake up every morning in your new place super excited and filled with joy? I hope you do. But I also hope you’re financially prepared for one of the most expensive endeavors of your lifetime. (Next to having children, of course.)

Whether you own a true fixer-upper or brand-new construction, I wanted to devote an entire piece that answers (once and for all!) how much to save for home maintenance each year. I know “upkeep” on a home is a set of expenses that surprises first-time buyers (and surprised me back in the day when I became a first-time homeowner!)

How much should I save for home maintenance?

There are two rules of thumb when it comes to knowing how much to save for home repairs. 

• The first is the 1% rule. That means you should save 1% of the value of your home for maintenance and repairs each year. So if you live in a $350,000 home, you’ll want to save $3,500 annually for repairs. 
• Another rule you can use is to budget $1 per square foot. So if you have a 1500 sq ft house, you’d need to save $1500 annually for repairs. 

These numbers are pretty far apart, but there are a few ways you can reconcile them. The first is to save the larger number you get through these calculations. The second is to average the two results. For example, the average of $1500 and $3500 is $2500. 

There’s no rule saying you can’t save more for home repairs and renovations, and in some cases, a very old home may require more money in the bank. But the fact is that the more you save, the more you can update different parts of your house over time without having to resort to credit cards or a home equity loan or cash-out refinance. 

Here's a great home maintenance checklist broken down by season.

Maintenance vs. emergency repairs and do I really need to be saving for each?

Not all repairs are created equal. Maintenance repairs generally cost less than emergency repairs. These are tasks that need to be done but don’t have a time constraint associated, like replacing a door, or fixing your washing machine. 

On the other hand, emergency repairs are for when a pipe bursts or your toilet is overflowing. The situations that can’t wait a day or two to be addressed.

Do I need to save for both emergency and routine maintenance? 

The answer is yes, you’ll want to put money aside for both maintenance and emergency repairs. But, personally, I don’t make this complicated by saving in two separate accounts. I simply set aside 1% each year. 

And if I don’t use the full 1% that year, I just let it sit so it grows (very similar to a sinking fund) and then we don’t have to come out of pocket when those big emergency costs come knocking. Just this year I've used my home maintenance emergency fund to pay for some replacement electrical when a breaker went out and to replace the pump in the pond that broke down on me.

Also, you can use your emergency fund for these true can’t-wait-to-fix repairs. I won’t be mad at you. But I think it's better to have a separate savings account just for unexpected home repair costs.

Some of the most common repairs you’ll see

While each home is unique, every home will eventually need one (or all) of these common repairs:

• Leaky pipes are one of the most common repairs.

• Clogged garbage disposals.

• With time and usage, faucets erode and need replacing. You’ll need to turn off the water before changing it out, but this is something that’s easy to do yourself. 

• Electrical shorts are also a common problem in house repairs. This is something you’ll want to stay away from and hire someone who knows what they’re doing. 

• Water heaters generally need to be replaced about every ten years. This is definitely something you’ll want the professionals to take care of, and most plumbers can address this issue for you. 

When to DIY and when to call the professionals

With the right tools and knowledge, some of these repairs can be done yourself. However, it’s important to know when you can learn something from YouTube, and when it’s time to call a contractor. 

Generally speaking, if you’re having any electrical problems, do NOT try to figure it out yourself. There is a very real chance of electrocution if you just start poking around. (Here's the formula I use to determine if I want to invest the time or want someone else to do it.)

No matter which route you decide to go, you’ll have to pay for tools and parts (and of course, the time required in learning how to fix the problem and then actually fix it. Hiring someone is more money, but it means paying for their labor and knowledge and also less hassle.)

Otherwise, you’ll want to ask yourself a few questions. The biggest one being are you comfortable taking on the responsibility of doing this project? Do you have the time to learn the steps, or is this something that needs to be done quickly? Depending on your answer, it might be best for you to hire a contractor.

The TL:DR

Home insurance gives you financial protection in case the worst happens: fire, theft, flood, and other acts of nature. (You should definitely have home insurance, and will be required to buy it if you use a mortgage to buy your home.)

What we’re talking about here is home maintenance, which is routine fixes from normal wear and tear. Yes, you should be saving for home maintenance just as you save for other financial goals like retirement, vacation, or paying off your student loans. 

Personally, I'd keep it simple. When it comes to figuring out how much to save for home maintenance, just put 1% of your home's purchase price in the bank and refill as needed. (Here's how I saved $1000 in a month.)