Reorganizing Your Finances After Buying a House
Becoming a homeowner is an exhilarating journey marked by significant financial commitments and meticulous planning. The pride of owning your own piece of the world is a remarkable milestone. Yet, amidst the excitement of this achievement, the financial adjustments of being a homeowner often catch people off guard.
Navigating your new financial landscape after purchasing a home can often feel like a complex puzzle. In this article, we’ll unravel the intricacies of reorganizing your finances after buying a new home, ensuring your path to homeownership remains smooth and secure.
Credit Score Blues
One of the most common surprises new homeowners experience financially is the sudden drop in their credit score. It’s unexpected, and sometimes, the decrease can be significant. However, it’s vital to note that this decline is only temporary.
A house is likely one of the largest expenses you’ll make in your lifetime. Consequently, when you finance a home, your total outstanding debt rises substantially. The spike in new debt can throw your credit score off temporarily. Don’t panic. As you begin to make on-time payments on your mortgage, your credit score will rebound.
Moving Into a New Budget
Transitioning from an apartment to a house will drastically change your financial landscape. Your savings likely took a considerable hit between your down payment, closing costs, and moving expenses. Instead of trying to adjust your monthly budget, it’s often easier to start anew.
As you begin working on a new budget, consider the following items:
House Payment:
Your monthly mortgage payment will probably be your largest monthly expense. So, it’s important to ensure your budget and cash flow align with your payment date. Remember, your mortgage payment typically includes escrow items, such as property taxes and homeowner’s insurance.
New Utilities:
Getting comfortable with your new utility costs can take a little time. For example, your electric or water bills may fluctuate significantly in the first few months. This can be especially true if you purchase a home in the summer or winter when cooling and heating costs vary greatly. Ask neighbors for guidance if you’re unsure how to budget for your new utility bills.
Upgrading Décor:
Turning your new house into a home requires your personal touch. That can include decorating, upgrading furniture, and completing various projects. However, you don’t have to rush to do everything at once.
Instead, create a category in your monthly budget for home improvements. Then, take your time personalizing your new place. This tactic helps you avoid overstraining your budget and costly credit card debt.
Ongoing Expenses:
Your new home requires constant attention. To prevent costly repairs down the road, ongoing maintenance is crucial. As you work on your new budget, identify any recurring costs associated with your new home. These might include pest prevention, lawn care, routine gutter cleaning, air conditioner inspections, etc.
As with any budget, it will take time to get everything working properly as you adjust to new bills and other expenses. Your initial goal is to ensure your major financial obligations, like loan payments and bills, are covered. Then, fine-tune your finances as you go along. Remember, progress, not perfection, is your goal.
Rebuilding Your Savings
The upfront costs of buying a home can be substantial. People often experience a steep decline in their savings after paying their down payment, closing costs, and moving expenses. As you rework your budget and adjust to new expenses, make room to replenish your savings.
While it can often feel challenging to save money after making such a significant investment, keep the following tips in mind:
Start Small:
You won’t rebuild your savings overnight. Instead, focus on making routine deposits into your savings or retirement accounts. Building the habit of saving is more important than the amount you put aside right now.
Automate Your Savings:
Use payroll deductions to transfer money from each paycheck into your savings automatically. Or set up automatic transfers to move a specific amount of money into your savings monthly. Placing your savings on autopilot is a great way to ensure your balance grows with minimal effort.
Focus on Your Emergency Fund:
There are lots of responsibilities that come with being a homeowner. For example, there is no landlord to call for sudden repairs or to replace broken appliances. Instead, that duty falls on you. While you hope these situations never arise, being prepared is the best strategy.
Focus on building your emergency fund first. Try to put between three to six months of living expenses aside in a liquid account, such as a money market account. Not only does your emergency fund help cover unexpected costs, but it also prevents you from relying on more expensive alternatives, such as payday loans or high-interest credit cards.
We’re Here to Help!
Whether you plan to buy your first house or your forever home, your finances will need adjustments afterward. Review any new expenses and rework your budget to accommodate your new lifestyle.
If you have questions about budgeting or want to explore options to rebuild your savings, we’re ready to help. Please stop by any of our convenient branch locations, send us a secure message in online/mobile banking, or call 540-389-0244 (local) / 866-389-0244 (toll-free) to speak with a team member today.
Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.