Congratulations and welcome to the American dream—you’re a homeowner! It’s a privileged position. However, along with privilege comes responsibility and owning a home is a pretty significant one. Unlike apartment life, everything that happens now is on you. Making smart financial decisions after you’ve bought a home will help you be ready to deal with whatever comes up.
- Shore up Your Savings
Odds are, it took the better part of your nest egg to purchase your home. Down payments, closing costs and all the other associated expenses can exact a real toll on savings. This is why it’s important to put a plan into place to replenish your account as soon as possible. You should also immediately start building a rainy-day fund to cover home repairs so you can avoid going farther into debt if something malfunctions.
- Eliminate Private Mortgage Insurance
If your down payment was less than 20 percent of the purchase price, you have private mortgage insurance (PMI) to cover your lender should you default on the loan. This expense can come to as much as several hundred dollars a month—depending upon the value of your home. Your first goal should be to pay the principal balance of your loan down to 80 percent of the value of the home as soon as possible so you can cancel the PMI policy. Most people do this by earmarking extra mortgage payments each month “for principal only.”
- Cut Frivolous Spending
Use your first year of home ownership to see where your money goes each month. Most things will cost more, such as utilities, garbage and insurance. You’ll also need to accomplish at least one of the items above. Trying to do all of that and buy into every hot deal you see on Groupon will be difficult. So, for the first 12 months, limit purchases to necessities. This will help you rebuild your savings account more quickly, so you can have cash on hand should an unforeseen expense pop up.
- Enact Cost Cutting Measures
Do you really need cable when Netflix has more TV than you’ll ever be able to watch for a fraction of the price? Buying your own modem and router will reduce your internet bill by at least $20 each month. Grocery shopping with a list will keep you focused on needs rather than succumbing to wants. Limit “date nights” to a couple of outings a month rather than every week. Better still, takeout, a nice bottle of wine and candlelight makes for a romantic evening in your new home. This is also a good time to make sure you have the exact insurance coverage you need. A good homeowners insurance calculator will help you in this regard.
- Avoid Credit Purchases for at Least a Year
You’ve just taken on the granddaddy of all debt—a mortgage. Why dig a deeper hole from which to climb by opening new credit accounts? Similarly, avoid the temptation to go out and buy new furniture and window treatments right away. Your goal for the first year is to save as much money as possible. Why rush to fill the house with furniture and new blinds? Take your time, shop carefully and ultimately you’ll be happier with your purchases.
- Make Repairs as Soon as Possible
Letting things go can make fixing them more expensive eventually. Yes, while this entire article has admonished you to save, when it comes to effecting repairs, you’ll actually save money by spending for them as early as you can. Some problems, like a leaking sink, can lead to other problems such as rotting cabinets. Fixing things right away almost always works out to be cheaper than letting them wait.
Making these smart financial decisions after you’ve bought a house will help you hold on to it. After all, getting the house was only a small part of the picture. The big picture is keeping it and enjoying it.