Home Repairs and Maintenance Budget question

[Original Wally]

Wow. I feel ashamed. As a retired bean-counter, I feel like I should have a better budgeting system, but I don't. We, too, are so LBYM that I don't seem to need a budget. I just take care of what needs taken care of. So far, age 58, I am still able to DIY much of the repairs, which saves money. Wow... some of you guys and gals are pretty amazing.

 

[Mulligan]

I'm not retired yet, but I expect to do something similar to Retire2013. I would rollover the annual amount each year till I hit a ceiling, like $25k, then when a large expense came up start putting it in again. Kind of like a maximum vacation account at w*rk

I have a basic 1500 sq ft ranch. I got 20k squirreled away for any major repairs in a CD. It's really only there for roof and siding when it needs replaced in 10 years. Everything else, I just pay out of pocket like my outside a/c unit that went out last summer. Complain a bit then wrote the $1300 check.

 

[HFWR]

Lord willing, and all that, I figure I'll need maybe one new roof, two A/C units, and maybe two cars for the remainder of my useful life, assuming it actually is useful...

So, my plan is to have that much in taxable accounts, to avoid overly large withdrawals from tax-deferred, where most of the stash is.

More routine stuff will come out of the yearly budget. Luckily, I'm fairly handy around the house, and can DIY.

 

[easysurfer]

For home repair and car repairs, I don't set extra money aside. Instead, I just budget have an amount allocated in my monthly budget. For example, let's say I allocate $1000 a month. Then during the year, if there is not repairs done from Jan to June, then my checking account should have the unspent $6000 sitting there in my checking. (At the start of each year, I do the rebalance, set aside annual money in money market and withdraw monthly to checking thing). If I get lucky and have no repairs, then I'll deposit the excess from checking back into the money market for the following year.

 

[BTravlin]

I guess I'm lucky in that I'm able to do most of my maintenance (cars, home, appliances, electrical, plumbing, property, etc) myself "if it's repairable".

I have always been moderately handy and try to fix things myself before calling in the professionals. And these days the internet and YouTube make performing many repairs possible for many people who aren't all that handy.

For example, last month DW came home from work after a tough day and put her lunch tupperware in the dishwasher. She didn't notice a couple of small chicken bones stuck inside the container and the bones were run through the wash cycle. Next thing you know the dishwasher won't drain and there's standing water in the bottom. My first inclination is to fix it myself but in looking at it I can't figure out how to take the insides apart to get to the drain area. So now I'm thinking about calling the repairman because I've never worked on a dishwasher before and don't want to screw anything up and make the problem worse and potentially more costly. But the thought of a $100+ repair bill made me think twice. So I get on the Net and did some searching by brand name and problem and low and behold there's a YouTube video demonstrating step by step how to repair the problem. About an hour and a half later it's back in working order without the ground up chicken bones clogging the drain. Did you know there's a food grinder in the bottom of your dishwasher? That was news to me. Anyway, that was time well spent for me and most satisfying on a personal level. (Yes, I'll take my cheap thrills where I can get them!) I've had similar success with plumbing, electrical issues and replacing a water pump on the clothes washer ($35 part + one hour labor).

So, my advice for those wanting to cut the repair bill is search the net for advice before shelling out money for service techs. With a little work you can find great sites that will help you diagnose and fix many household issues. Just make sure you realize your limitations and pull the plug before getting in over your head. If you do have to call a repairperson, make sure to watch them do the job as you'll often learn the secrets of accessing appliances and other useful tidbits that can save you money later.

 

[Live And Learn]

So, my advice for those wanting to cut the repair bill is search the net for advice before shelling out money for service techs. With a little work you can find great sites that will help you diagnose and fix many household issues. Just make sure you realize your limitations and pull the plug before getting in over your head. If you do have to call a repairperson, make sure to watch them do the job as you'll often learn the secrets of accessing appliances and other useful tidbits that can save you money later.

+1 ! My microwave oven had a couple of issues with the door handle breaking. Seems it was a "known issue" but since the oven is 10 years old the warranty was way expired. Found a video on YouTube that told us how to fix the problem. The second time another part of the door malfunctioned and it needed a new part. There was a $120 repair fee if I "called the man". Another YouTube video and viola - no repairman needed. Took about 20 minutes to fix.

We're pretty good about fixing little things around the house. My mainteance budget is mostly "parts" (not labor) until you get to the big ticket items like roof, hot water heater, etc

 

[Midpack]

I have a separate accrual account for non home maintenance things. 3k / year. Assumes a new used car every 10 years and occassional furniture meltdowns needing replacement.

I only use cash. Or let me restate ... I only use my credit card (love the year end summary and the points !!!) but I pay it off in full year month.

I don't actually accrue, we just call the account that because it serves the same purpose (from my Corp days) and it's easier than calling it the 'major unusual expenses for cars, home repairs/replacements, consumer electronics and whatever else comes up outside normal expenses' account. In practice we include those expenses as spent, on our spending spreadsheet, but there's no budget and variances are meaningless. It's all coming out of the nest egg as needed anyway. YMMV

We only use cash too, though I can see how zero/low interest can be compelling...

 

[ziggy29]

We put about $500 a month into an account dedicated for major repairs, new car purchases, that sort of thing. Usually we contribute a lot more than we spend, but occasionally there are years when the fund takes a big hit. As long as we both don't need a new car at about the same time, it should hold up.

 

[Animorph]

We have about the same $5k yearly budget and let it build. We've had this for years now. When it gets ridiculously large, we buy some new furniture. We've gone through a new roof, two external repaints, new appliances, 2 heat pumps and a third will be coming soon, and new carpet and internal repaint is sure to come in a few years.

New cars are paid from individual investments/savings, but not really individually budgeted.

 

[Meadbh]

I got the new Kiplinger's Personal Finance, April 2013 magazine today. There's an article called "How Long Will it Last?" on page 56. They state housing experts recommend you budget 1% of the purchase price of you home annually for maintenance and repairs.

I live in a condo, which might behave differently. I have a line item for condo fees, which cover many maintenance items. Sharing smooths out those expenses! I also budget about 0.3% of my home's value for internal maintenance. Only time will tell whether that's appropriate.

 

[PatrickA5]

I'm not completely retired yet, but getting close. I'm not sure I understand the "budgeting process" during retirement. So, are the people that are setting aside money each month taking money out of one account and putting it in another account? Or are you "saving" part of Social Security or Pension payments into various accounts?

I've been keeping track of expenditures for years but have never really "budgeted" for anything. I always just assumed when the roof needs replacing, I'd just withdraw that amount from one of my retirement accounts or CDs. Am I missing something?

 

[ziggy29]

I live in a condo, which might behave differently. I have a line item for condo fees, which cover many maintenance items. Sharing smooths out those expenses! I also budget about 0.3% of my home's value for internal maintenance. Only time will tell whether that's appropriate.

The *usual* rule of thumb is to budget about 1% of a home's value for repairs and maintenance each year, though with a condo or townhouse most (or all) of the external maintenance is handled through the dues and HOA fees so it's mostly internal stuff and appliance repair/replacement that gets you. Stuff like new roofs, siding or external paint is covered (in theory) by the association dues.

 

[mickeyd]

How do you think about/manage/track your home repair and maintenance? Do you set money aside and never touch it and keep adding to it and spending only from that fund for that particular type of expense?

Never have been a big fan of budgeting. We just have a cash reserve of about 18 months in expenses. Anything that needs fixing, updating or repairing gets paid for out on the cash-stash that is sitting in a savings account at USAA Bank earning 0.85% APY.

Keeping it simple for over 68 years.

 

[youbet]

We only use cash too

Bartering has been getting tougher and tougher. Too many folks that are not interested in trading home repairs for DW's quilting. So, more often than not, we pay for things using cash (currency, check, CC, etc.) too.

I do have a buddy who is quite the beer brewer and makes some terrific stuff. He still finds bartering with a couple of different guys who do home repairs to be possible.

 

[easysurfer]

Beer and Pizza can go a long way as goods for bartering

 

[Katsmeow]

Should I continue to let that budget accumulate year after year?
Retire2014

One way to handle irregular categories is to put a cap on certain categories. For example, let's use veterinary expenses. I do accumulate that category from year to year. However, I put a cap on it and once I reach the cap then I don't keep adding to the category unless I "use" some of the category. So, let's say my cap on a category was $1800 and I was adding $100 a month to it. Once the category got to $1800 I wouldn't keep adding to it unless I had an expense to take it below $1800. Same thing for accrual accounts for various expenses. Once I reach the cap then I don't keep adding to it unless I spend something.

 

[samclem]

I've been keeping track of expenditures for years but have never really "budgeted" for anything. I always just assumed when the roof needs replacing, I'd just withdraw that amount from one of my retirement accounts or CDs. Am I missing something?

If you are withdrawing your regular amount every year and spending it all, then withdraw money over and above this for pop-up big expenses ( a roof, a car, an air conditioner, etc) then you're really withdrawing more than the planned-on withdrawal rate. I think this budgeting exercise is designed to assure there's enough set aside/left in the big account to handle these infrequent expenses and keep to the planned withdrawal rate.
Here are two earlier threads on home repair costs and budgeting for other infrequent expenditures (appliance replacement, etc):
Costs/cycle for expected replacement items
Do You Keep A Reserve Fund?

 

[youbet]

I'm not completely retired yet, but getting close. I'm not sure I understand the "budgeting process" during retirement.

Try picturing people with an extreme passion for data related to spending.

So, are the people that are setting aside money each month taking money out of one account and putting it in another account? Or are you "saving" part of Social Security or Pension payments into various accounts?

I keep no "separate" accounts to accrue for periodic, large expenditures such as cars, a new roof, etc. Those bux are accounted for in my informal "need for liquidity" estimates and come from my FIRE portfolio when needed.

I've been keeping track of expenditures for years but have never really "budgeted" for anything. I always just assumed when the roof needs replacing, I'd just withdraw that amount from one of my retirement accounts or CDs. Am I missing something?

Nope, you're not missing a thing as long as your resources vs. your expenses are adequate enough that needing $10k for a major house repair or $30k for a car isn't a life altering experience.

Also, it hasn't happened to me yet, but if something extraordinary occurred and I could not easily come up with the cash in short order, I'd borrow it and I do have a line of credit. A few months of interest payments while I figured out the best way to cash in some investments (or a few years for that matter) would likely be a small expense vs. keeping big bux in cash "just in case" year after year after year.......

Don't sweat it.

 

[chasesfish]

I've fortunately always been able to pay for this stuff as I go. I structured my mortgage with part of it on a variable rate equity line (20k range). The line goes up and down as I pay my monthly maintenance fund into it and draw when I need something really big. The balance was lower, but between a new HVAC system and half the windows being replaced, it's been put to good use. Georgia summers can be tough on a house

 

[Live And Learn]

I don't actually accrue, we just call the account that because it serves the same purpose (from my Corp days) and it's easier than calling it the 'major unusual expenses for cars, home repairs/replacements, consumer electronics and whatever else comes up outside normal expenses' account. In practice we include those expenses as spent, on our spending spreadsheet, but there's no budget and variances are meaningless. It's all coming out of the nest egg as needed anyway. YMMV

We only use cash too, though I can see how zero/low interest can be compelling...

Ex-beancounter ? I am one today .... waiting to FIRE so I can call MYSELF an ex-beancounter

I dont actually have a separate 'account' either, its a budget item that I am not allowed to spend the "saves" from because I know at some point there will be a payment. In my budget I call the non-home maintenance items "future one time expenses". I have the home maintenance at 1.25% (just reduced it today from 1.5% since I have 50k set aside outside my portfolio for the first round of events - think roof and A/C)

 

[Animorph]

I'm not completely retired yet, but getting close. I'm not sure I understand the "budgeting process" during retirement. So, are the people that are setting aside money each month taking money out of one account and putting it in another account? Or are you "saving" part of Social Security or Pension payments into various accounts?

I've been keeping track of expenditures for years but have never really "budgeted" for anything. I always just assumed when the roof needs replacing, I'd just withdraw that amount from one of my retirement accounts or CDs. Am I missing something?

Good question.

When projecting future retirement expenses in the future, home improvement/repair spending is in the budget as a yearly expense. I assume it is withdrawn and spent each year. That ensures that those expenses are planned for and won't impact other planned spending.

All of my accrued budget balances are simply account balances in Quicken. Whatever I don't have in the checking account for near-term expenses is invested in the portfolio with the normal asset allocation. However, when projecting the portfolio value into the future, I subtract out all the accrued budget balances from the portfolio at the start. Just as if it had all been spent already. That allows me to spend within the budget without concern for meeting specific withdrawal limits. If it's budgeted, it's OK.

 

[Katsmeow]

I'm not completely retired yet, but getting close. I'm not sure I understand the "budgeting process" during retirement. So, are the people that are setting aside money each month taking money out of one account and putting it in another account? Or are you "saving" part of Social Security or Pension payments into various accounts?

I've been keeping track of expenditures for years but have never really "budgeted" for anything. I always just assumed when the roof needs replacing, I'd just withdraw that amount from one of my retirement accounts or CDs. Am I missing something?

Budgeting really has nothing to do with putting money from one account into another (well, it shouldn't I don't think). Budgeting has to do with planning what money you will spend so that you don't spend more money than you can afford to spend. (I use a budgeting program called You Need A Budget).

Budgeting is arguably more important during retirement than before. That is during retirement you must make your money last and your ability to get more money through employment is limited or non-existent.

So, why budget? Let's say that you can safely spend $60,000 a year during retirement and you will feel confident your money will last. (If you don't know what you can safely spend each year I would submit that you need to determine that amount).

Now for some people there base expenses and their desires to spend are such that they easily stay under $60,000 a year with no planning whatsoever. If they suddenly need a new roof - no problem because they have been spending only $40,000 a year for years.

For the rest of us .... We don't want to end up in October and realize we've spent $50,000 already and we have $5000 in real estate taxes due at the end of the year and we forgot about Christmas presents and forgot about homeowners insurance coming due and the automobile suddenly needs a $3,000 repair and then the AC goes out, etc.

The point in budgeting is therefore to plan for the expenses that will come up during the year - including accruing in some means for those that might only come once every several years. Again, how critical it is to do this will depend upon how tight your budget is. The person who has a SWR of $150,000 a year but regularly spends $50,000 a year can probably just pay for the roof or new car whenever.

 

[oldphd]

Good info in this thread, as I move closer to FIRE and thinking about how to manage $$$...

(I have a daughter who uses electronic "envelopes" - literally separate savings accounts at her bank - to bucket certain erratic expenses. She does it so she doesn't feel guilty about spending money on "fun" stuff right after she gets the car fixed. But, we've done LBYM for so long that we don't need that type of self discipline.)

This quote reminded me of a friend, so I'll share a little story I always found humorous, hope you enjoy...

Good friend of mine graduated from college in '81. We went to the same school, worked for the same company, saw each other almost daily for a few years. Upon graduation he and another guy moved in to a nice apartment, got newer cars, nothing crazy but enjoying the new income. Both lacked discipline when it came to money, they'd spend what they had, but they recognized it. One day I stop in to see his new apartment and there's this big stuffed bear (not adult, but big kid) sitting in a bean bag chair with envelopes in different places, under an arm, in a hand, etc. I said what the heck is that? He says that's Dave the Budget Director. I say Huh? He says they named the bear after Dave Stockman, government budget manager or something at the time, and when they got paid the first of the month they put cash/checks into envelopes for rent, utilities, etc., and then could only spend what was left.

Fast forward a couple of years, he's single and living large with money burning a hole in his pocket, I'm a new grad, dad, have a house, and not even up to the point where you could say I was living paycheck to paycheck. He'd been talking about getting a car to replace the used Honda Accord he'd purchased upon graduation, was talking low end Porsche. Sat. late afternoon he stops by, rings the bell, my wife is out and I'm babysitting, not an unusual thing to happen. He grabs a beer and we're chatting and I realize he's nervous, and I say What's up, is something wrong? He says, well, I did something bad. I asked if it was red and sitting in front of my house, and he say NO!!!! .... then sheepishly adds It's black... He bought a 300ZX turbo as an impulse purchase that afternoon...

Oh well, hope you enjoy... Happy Sunday everyone!

 

[Live And Learn]

All of my accrued budget balances are simply account balances in Quicken. Whatever I don't have in the checking account for near-term expenses is invested in the portfolio with the normal asset allocation. However, when projecting the portfolio value into the future, I subtract out all the accrued budget balances from the portfolio at the start. Just as if it had all been spent already. That allows me to spend within the budget without concern for meeting specific withdrawal limits. If it's budgeted, it's OK.

Very eloquently defined. That's exactly what I was (poorly) trying to say earlier

 

[HFWR]

I'm not completely retired yet, but getting close. I'm not sure I understand the "budgeting process" during retirement. So, are the people that are setting aside money each month taking money out of one account and putting it in another account? Or are you "saving" part of Social Security or Pension payments into various accounts?

I've been keeping track of expenditures for years but have never really "budgeted" for anything. I always just assumed when the roof needs replacing, I'd just withdraw that amount from one of my retirement accounts or CDs. Am I missing something?

One reason to "budget" for these bigger ticket items is so you won't have to pull say $10k out of your tax-deferred accounts all at once for a new roof, throwing you into a higher bracket.