Preparing for breakdowns in the home

[rutgers07]

Does anyone put money away (in addition to an EF) for the inevitable breakdown of household things like the furnace, hot water heater, etc.? If so, is there a general rule to follow?

[MooseBucks]

I have a separate "House" emergency fund account for anything that might come up. I didn't use any magic formula for how much to put in there and just ended up at 10k. We live in townhome that we bought new so you might decide a different number is better for you based on age & size of your home.

[Fishindude77]

Shingle roofs last 15-20 years, furnaces & AC about the same, water heaters 10 years, if you have a painted wood house 5 years, etc. If you are handy and can do some of this stuff yourself you can reduce expenses by half or more but this is just normal stuff that wears out that you have to be prepared for if you own a home. Budget for it and build your EF accordingly.

[Nutria]

Does anyone put money away (in addition to an EF) for the inevitable breakdown of household things like the furnace, hot water heater, etc.? If so, is there a general rule to follow?

I've got $1,250 in an "Appliance" fund. Washer, dryer, fridge, dish washer, oven all cost less than that.

We've also got a "Home Repair" fund that I created this month. $270/mo to start and more later. (Known large repairs are coming this year which might require a HELOC.)

[AJ444]

I don't have one now since I rent but I used to budget $250/month for my townhome and it was about right. Association dues covered the outside.

[kork13]

I do have a "House Fund" in separate savings accounts for each of the two houses we own. I add $200/mo to each, and have a notional "limit" of 12 months' PITI costs for each house. I've never actually gotten them to that level, but if they ever do get that high, I plan to stop adding more money to it.

My rationale for setting the max at 1 year's PITI is multi-faceted:
- First & foremost, it's enough to keep my family in the house for that long (or for the rental, cover us in the event of an extended vacancy).
- It's also enough for any major repair (actually enough for 2-3), including a new roof, new furnace/HVAC, water heater, or replacing major appliances.
- In the event of a catastrophic loss (rental house is in the Oklahoma City area, aka Tornado Alley, so this is a 100% valid concern), it's enough to cover our insurance deductibles & get us into a long-term rental while we deal with it.

So far, we've never gotten the House Funds above about 5 months' PITI, but it's a work in progress. We also use them as savings for doing improvements, which is why they've never gotten close to our max. The rental house got a storm shelter & rain gutters added a while back, and we have some renovation plans for our current house (mostly, updating the bathrooms). However, we do also keep a minimum of about 2 months' PITI in the accounts to cover smaller issues, which I've already been grateful for... The rental house took longer than expected to get our first tenants (almost 3 months), so our then-4.5 month House Fund held us over with zero concern for being able to cover the payments.

[tripods68]

We just have a one EF which is for everything. We have about $30K and adding $100 weekly to it.

We also have another savings account that we save for vacation, pay annual tuition, home improvements repairs, and christmas. We add about $400 weekly to this fund. This helps fund our big expenses for the year without the need to ever tap our true EF. More importantly its just keep things simple.

[disneysteve]

Just general "emergency" savings here. We don't do a written budget or break things down into dozens of categories. Money is money. As long as we have some, we're in good shape.

[feh]

Does anyone put money away (in addition to an EF) for the inevitable breakdown of household things like the furnace, hot water heater, etc.? If so, is there a general rule to follow?

We use our EF for such expenses.

[feh]

Just general "emergency" savings here. We don't do a written budget or break things down into dozens of categories. Money is money. As long as we have some, we're in good shape.

+1

I don't understand the need to have multiple accounts for each category. Seems like unnecessary complication.

[disneysteve]

We use our EF for such expenses.

I guess the question then becomes how we decide how much we need in the EF. The usual rule of thumb is based on x months of living expenses. That is thinking of the EF primarily in terms of a job loss fund. When you instead look to your EF for other purposes - a car repair, a new dishwasher, a medical bill - how do you arrive at a good amount to keep in that EF?

[feh]

I guess the question then becomes how we decide how much we need in the EF. The usual rule of thumb is based on x months of living expenses. That is thinking of the EF primarily in terms of a job loss fund. When you instead look to your EF for other purposes - a car repair, a new dishwasher, a medical bill - how do you arrive at a good amount to keep in that EF?

Right. As I've posted before in other threads, we are at a point in our life where "Emergency Fund" is a misnomer, as an EF is, for most people, a source of funds if one were to lose their primary income.

We are in the transition from accumulation to retirement. It wouldn't be a big deal if both my wife and I got fired tomorrow. So, while I still refer to this bucket of money as an EF, it ceased to be that quite a while ago. It is really our "occasional large expenses" fund (furnace, roof, new car, vacation).

We generally keep $20-30K in this account. But, the actual amount can vary, depending on the known large expenses we'll have in the next 12 months. For example, if I know we'll be replacing the roof and buying a new car soon, I'd have the balance over $30K. If there aren't any large expenses on the horizon, I'd be fine with it dipping below $20K.


PS - even when our EF truly was an EF, we still used it for occasional large purchases

[disneysteve]

I don't understand the need to have multiple accounts for each category. Seems like unnecessary complication.

I totally understand why some people do this. As we've discussed in another thread recently, it depends on the type of person you are and how you approach money and savings. Some people see money in savings and it burns a hole in their pocket so they go out and spend it. But giving that money a name like "new car fund" prevents them from doing that.

[kork13]

I don't understand the need to have multiple accounts for each category. Seems like unnecessary complication.

I don't go overboard with dividing up money into separate categories, but I do use 5 or 6 accounts for specified purposes. I think the benefit for me is making sure that we have what we need for all of those objectives at a glance. It also keeps me from spending too much on one thing to the detriment of another.

I have considered mashing everything into a single account, but I'm just not yet comfortable with that yet. Perhaps over time that will change, similar to how I've changed from having & following a specific budget to using it more as a savings plan & not worrying as much about where exactly I'm spending each dollar as long as we save what I want to each month.

[Nutria]

+1

I don't understand the need to have multiple accounts for each category. Seems like unnecessary complication.

Adding a (so far never used) column to a spreadsheet isn't that much of a complication. And having multiple categories restricts the definition of "emergency" from "anything slightly out of the ordinary" to the realm of "ack! catastrophe!" where it rightly belongs.

IMNSHO, of course...