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    Managing home expenses

    Staying on top of home maintenance is important. In fact, some experts suggest budgeting at least 1% of the home’s current value annually for regular home maintenance. That figure could rise depending your home’s age, location, and previous maintenance activity. What’s the difference between home maintenance and renovations, and why should you spend money on them? Here’s what you need to know.

    Home maintenance refers to regular upkeep, such as cleaning rain gutters, trimming tree branches and shrubs, and replacing furnace filters. It also refers to longer-term, higher cost maintenance activities such as replacing a roof or carpeting. Investing in regular home maintenance could reduce the cost of home repairs and renovations down the road.

    Home renovations are generally much bigger jobs with bigger price tags. Popular home renovations include replacing entire kitchens and bathrooms, appliances, and flooring.

    Why regular maintenance is important for homeowners

    Home maintenance is important for all homeowners, regardless of your future plans. Is this your “forever” home? Taking care of home maintenance chores can help prevent small cracks or leaks from developing into larger and more expensive problems. If you plan to sell your home at some point, evidence of regular home maintenance shows buyers that the house has been well cared for.

    Regular home maintenance also has an impact on your home equity. Home equity is the difference between the market value of your home (the amount it could currently sell for) and the amount you owe on it - your mortgage. Your home equity increases as the market value of your home increases and your mortgage balance decreases. A well-maintained home will have a higher market or property value than one which hasn’t been properly cared for.

    How to budget and save for home maintenance repairs

    There are at least two popular ways to calculate your home maintenance budget: the “one percent rule” or the “square foot rule.”

    The one percent rule

    To use the one percent rule, calculate 1% of your home’s value, divide it by 12, and add that amount to a “home maintenance” category in your regular monthly household budget. For example, if your current home value is $600,000, you’ll add $500 to your monthly budget ($600,000 x 1% = $6,000/12 = $500).

    The square foot rule

    The square foot rule is even simpler. Just calculate $1 for each square foot. If you own a 2,400 square foot home, budget $2,400 annually, or $200 monthly.

    Whichever method you prefer to use, keep in mind that upkeep costs may be higher for older homes or those which haven’t been well-maintained in the past. It likely won’t be necessary for you to spend $500 or $300 each month. Instead, set up a savings account for home maintenance. Then when it’s time for more expensive projects, such as a roof replacement, you’ll have savings to help pay for it. If, however, your home maintenance savings account is a little short, talk to your lender about a home equity credit line.

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