Home Maintenance Budget vs. Emergency Fund

Owning a home is very expensive. I should know because I own three homes (along with my wife). As a homeowner, you must always prepare for the worst.

It is also essential to plan for the unknown as an average person. We can achieve some form of security by building an emergency fund.

Along the same lines, we can create an emergency fund for each home. By separating the two funds, you can clarify where your money is going.

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Do you need to separate your Home Maintenance Budget (HMB) and emergency fund? You don’t need to separate the two funds if you don’t wish.

However, if you keep them together, your emergency fund needs to grow in size. At any given moment, your house can cost you between $10,000 to $15,000.

Of course, that would be if the roof and air conditioner went out simultaneously. But, some random events can happen inside your home.

Some of my past issues. Over the last 14 years of being homeowners, we have seen a lot of maintenance issues.

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We have had issues with septic tanks, wells, pumps, termites, trees, flooding, leaking, garbage disposals, sinks, tubs, and fences. That is just to name a few. 

The benefits of separating the two funds. I paid for all of these issues with cash flow from my job. As we move towards retirement, I want a clear view of my finances. 

I want my emergency fund to have six months of regular expenses. I then want each home to have $10,000 in its maintenance budget. 

I think it is more of an exercise in stress reduction to separate the two. When an emergency or planned maintenance issues happen in the home, you can easily get the money to solve the problem.

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I recently had a $3,000 water pump issue in my home in Arizona. I quickly took the money out of my high-yield savings account and didn’t have to change my usual budget.

However, it would have been even more convenient if I had an account earmarked for that specific home. That way, I don’t have to play musical chairs with my accounts. 

How to structure your two funds. I talk at length about building emergency funds. Each layer of your emergency has a purpose. Here is my standard pyramid inside an emergency fund; let’s use a total of $100,000 as an example.

1. High Yield Savings Account #1 ($20,000)
2. Series “I” Bonds ($30,000)
3. 30-Year Bonds ($50,000)

Your risk tolerance may be much different. You may want $100,000 in your HYSA. It’s up to you and what allows you to sleep well at night. 

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Building a Home Maintenance Budget. Creating an HMB is easy. Open a high-yield savings account in a separate bank and start building it towards its final amount. I will try to reach $10,000 in each of my HMBs over the next few years. My accounts will look like this for my three homes:

1. High Yield Savings Account #2 ($10,000)
2. High Yield Savings Account #3 ($10,000)
3. High Yield Savings Account #4 ($10,000)

You also want to ensure you link your HMB accounts to any home repair or maintenance websites you use. For example, I have a property manager for my home in Arizona.

When the water pump went out, I transferred the money directly to the property management web portal. You want to have these account pairs handy.

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Online banks may fail you. Most of the high-paying HYSAs are online banks with no physical locations. That means if you need $6,000 cash, it may be a chore to get it.

Connect all of your bank accounts together. Yes, it is a chore, so I do it a few accounts at a time. But, I like having my accounts pointing to my Navy Federal and Wells Fargo accounts. 

These banks and credit unions have physical locations everywhere. If I need cold hard cash, I can take money out of one of these institutions and reimburse myself.

Credit Cards to the rescue. Depending on the emergency, it may be a good idea to use a credit card for the quickest response. Credit cards can alleviate some short-term pain as you get your money together over a few days.

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For example, if you have an HYSA with Discover, you may want to connect a debit card, credit card, and checking account.

Now, you have multiple ways to solve the emergency and pay yourself back. Plus, since it’s an online bank, you wouldn’t need a physical location if you could use your credit card instead.

Plan, plan, plan. As you can see, it’s all about pre-planning for your emergency. Yes, it is depressing to pay for something that breaks.

But, it feels good to solve your problem without additional family stress. Next, you can determine how to pay yourself back with cash flow.

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Getting started with an emergency fund and home maintenance budget. It can be tough to save. The idea is to build these accounts slowly.

Dave Ramsey recommends building your first $1,000 emergency fund quickly—this is important. Honestly, most of your issues inside your home are less than $1,000.

That first $1,000 will prevent you from using a credit card and keeping a balance into the next month. After the first $1,000, create a monthly plan to add to your funds.

After you have $7,000 in your emergency fund, you will want to separate $1,000 into your house fund. Keep this up until you reach the desired amounts. It may take a few years, but it’s okay.

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Conclusion. Don’t worry; I am adding to my accounts as well. I need to follow my advice and open HYSAs for my houses.

I have standard savings accounts for each of my homes, with roughly $1,000 in each account. So, I have some work to do to build these accounts. 

The fun part of life is creating a plan and working towards the goal. Sure, there will be emergencies and maintenance issues along the way.

I have the final goal in mind. I am saving money, preparing for the unknown, and protecting my family from heartache. That’s how you live a great life. Good Luck!

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