STRATEGIC SAVINGS GUIDE PART 3

July 10, 2017

HOME MAINTENANCE 1: The How and To of Budgeting For Your Household Expenses

If you had a dime for every time someone dropped the phrase “An ounce of prevention is worth a pound of cure,” you’d probably have enough to cover all of your home maintenance costs for at least the next couple of years. But if we earned only a nickel for every time we’ve seen people overlooking or roundly ignoring this advice, we’d have a thriving side business.

Spring has sprung. It may have taken a while to arrive, but now that it’s here many of us are feeling the heat to literally get our houses in order before the start of summer. Unfortunately, maintenance tends to be one of the most consistently neglected and undervalued aspects of homeownership. The biggest obstacles we hear from everyone are those famous twins, Time and Money. Keeping track of all the little details of what needs to be done must be a very involved process entailing unremitting diligence and focus, and the challenge of upkeep has to be quite expensive, especially if one’s home is on the older side of the market, right?

The good news is that it really doesn’t have to be this way. In this third installment of our Strategic Savings Guide, your friendly gurus here at Bromwell Construction are going to break down the How & Tao of your home’s upkeep cycle. This week, we’ll show you how easy it is to automate this process. Along the way we’ll lay the foundation for the final chapter of our guide, where we will introduce you to a number of handy cost saving moves you can make that will ensure you won’t break the bank. Before we get started, we thought we’d lend a bit of validation to that time-honored “prevention” cliche by way of a simple question.

I. THE VALUE OF PLANNING AHEAD

Would you rather spend $1 today or $100 tomorrow?

Seriously. You probably know that it only takes one little crack in a strip of caulk for mold and rot to build up beneath its surface. What you may not have known is that, if left unchecked, that mold can spread throughout entire sections of flooring and drywall and eventually lead to a serious health hazard, not to mention a potentially devastating financial setback. It’s no exaggeration to say you could be spending $5000 to fix the damage that could have been stopped in its tracks by a $6 tube of sealant. Kind of puts things into perspective, doesn’t it?

You see, your house has quite a bit in common with the human body. Being made of matter, both are subject to the law of entropy. That means that the longer they are around, the more easily they start to break down. But a house, unlike a body, experiences two types of aging, these being physical and economic. Economic age refers to the number of years a house is expected to survive based on its current depreciation, which is the rate at which the house is expected to lose value. While older houses may be presumed to have a greater economic age than newer homes, this is quite often not the case when the house has been well-maintained. Well maintained houses lose value much more slowly than neglected homes, no matter how long they’ve been standing. What’s more, consistent and well-implemented maintenance may reverse economic age and improve your home’s curb appeal by up to 1% per year, according to this case study.

II. HOW TO IMPLEMENT A SERIOUSLY EFFECTIVE HOME MAINTENANCE SCHEDULE

Alas, simply knowing the value of a thing does not automatically translate into action. We humans are programmed to experience strong emotional reactions when we’re under stress. Stress resulting from procrastination builds and builds over time until it reaches a boiling point. What happens to us is a perfect metaphor for what happens to our homes in that something we could have resolved at a swift yet comfortable pace now becomes a crisis commanding our immediate attention and gobbling up the same precious resources we meant to save by ignoring it.

We believe that education is the solution here. Most people procrastinate not because of the amount of time it actually takes to perform a task but because they have psyched themselves out into believing it will take that much time. Truth is, there are really only three steps you need to take to create and launch an outstanding home maintenance plan. Once you’ve done these things, you can simply move on with your life.

1. Set Aside some time for planning
2. Make a checklist
3. Create a budget

A. Plan To Plan!

We’re more likely to do something when we’ve had time to prepare for it. So schedule your planning day in advance. We suggest writing it down in your calendar a week or two ahead of time. If it seems like something you really dread doing, give yourself an extra week, but our advice is of course to just roll up your sleeves and get to it fast. Luck may favor the bold, but success favors the swift.

You’ll want to set aside about three hours to brainstorm your plan even though it may take as little as two. In that case, use the extra hour to double-check and flesh out details of your list. The session should break down somewhat like this:

• Create Checklist = 30 min
• Take your list on a tour = 30-60 min
• Organize Your List = 30 min
• Work out your budget = 30 min

B. Create Your Checklist

Outlining a checklist is the key to finding out exactly how much time your projects will actually take. Start by drawing three columns. The first can be labeled “Task,” the second you’ll call “Time,” the third you’ll name “Frequency.” Start with the first column only, writing down everything you can think of off the top of your head. No need to organize these just yet. Simply empty the contents of your brain (figuratively, mind you) into your “Task” column.
After that, take your list on a tour of your house. Start in your attic and go through every room all the way down to the basement, visually scanning each room and adding anything you may have missed. Make sure to finish out with a walk around the yard and adjoining property as well, checking any fixtures such as sheds and garages.
Once you’ve completed this run, you’re ready to move on to your second column, where you’ll write down the estimated time it will take to complete each task. If you’re not sure how much time each task will take, don’t sweat it. We’ve got a link at the bottom of this section that covers virtually every household maintenance task known to the human mind, along with time and frequency averages. Nonetheless, we suggest you consult this link after generating your own list since each homeowner will want to prioritize tasks a little differently based on the condition of his house and property.
When you’ve figured out the time it will take for each task, go ahead and tally everything up. Now that you’ve got a definite figure to work with, you can spread the total time out over the course of the upcoming year. You’ll find that some tasks need to be done daily, while others should be done once a week, once a month, or seasonally.

C. Organizing Your Checklist

With your list of projects now laid out in front of you, it’s time to organize your checklist. Before diving into the weeds, we suggest you comb through your list for “mission critical” tasks. These are the defensive repairs that every homeowner should target first, as these will bolster your home’s ability to withstand the elements. These preventative tasks will save you money in the long run, but you won’t have to wait 10-20 years to enjoy the payoffs. You’ll find that by prioritizing the tasks we’ve listed below, you’ll see an immediate decrease in your monthly bills as well.

1. Immediate Priorities

These are the tasks that need to be done as soon as possible to prevent a catastrophe of the sort we’ve described above. Some of these may include:

a. Kill The Drafts
• Get started with weather stripping ASAP before these leaks have the chance to impact your heating bill. In particular, seal up all outlets, switches, water and furnace flues.
• As mentioned in our last post [link to it], be sure to pay extra attention to the attic. It’s one of your home’s principal weak spots and costs very little to shore up. About six inches of insulation all around should do the trick.
• Install insulation in drafty rooms to save up to 30% on your energy bill.
• Also wrap any exposed water pipes with insulation to effect a 2-4 degree temperature difference. Start with the pipes that run in and out of the water heater and branch out from there.

b. Plug The Leaks
• Drain your water heater annually
• Pump your septic tank every 3-5 years
• Clear your gutters seasonally. If you haven’t installed gutter guards yet, make sure to do so next time you clean them.

c. Do Spot Repairs
• First, check for cracks in your home’s foundation. If you can’t address these right away, at least mark them with a permanent marker or just use some dated masking tape to measure their expansion over time.
• Be on guard for chipped paint and missing mortar, as these can quickly turn into breeding grounds for mold and pests.

d. Clean Exterior and Interior Vents Annually
• Specifically, check all room vents for dust and debris. Eradicate these mercilessly.
• Next, check laundry vents and dryer screens
• And HVAC too
• AC filters should be changed monthly, unless of course you prefer letting your AC malfunction 5-10 years early, in which case you’ll definitely want to ignore this advice.

e. Other Important Cleaning Tasks
• Plan to clean refrigerator coils once every 3-4 months
• Schedule to have your carpets cleaned professionally once per year.You might be surprised at just how easily mold can build up deep within the fibers.

Once you’ve scheduled these main projects, you can go ahead and flesh out your outline by consulting this link for a comprehensive list of home maintenance tasks. There’s a lot of information here so don’t let it overwhelm you. Just go through the list and see which items you want to include in your own list. When you’re done, break out your calendar and write them all down. Boom. You now have a comprehensive home maintenance plan that prioritizes all the universally important projects and customizes everything else to your particular needs.

III. THE BEST WAY TO BUDGET FOR MAINTENANCE

Now that you’ve plotted out your annual maintenance schedule, there’s only one thing left to do, and that is to figure out how much cash to set aside for this year’s upkeep cycle. Traditionally, there are two methods for determining this figure. As you’ll see below, neither of them is really terribly helpful in and of themselves but we will use them as our starting point.

A. The 1% Rule vs. The Square Foot Rule

By far, the most popular approach is to take 1% of your home’s initial purchase price per year. So, if you spent $250,000 on your home, then you will set aside $2,500 every single year for maintenance. Simple, right?

Problem is, this “rule” is really more of a guideline. Realistically, your expenditure over time will have more to do with your home’s size than the amount you paid for it at closing. Hence, an alternative method was devised to account for this problem. It’s known as the Square Foot Rule, and it states that you should set aside $1 for every square foot of land your house occupies per year.

The Square Foot Rule is a bit more accurate than the 1% Rule but it has problems of its own. For instance, you may live in an area where the value of the adjoining land is substantially greater than the value of your house. In that case, the size of your home won’t be a very effective yardstick since a desirable plot of land can dramatically raise the purchase price even of a fairly small house. Conversely, a very large house in a less desirable location is going to sell for far cheaper. You see, it’s all down to that age old cliche; location and value are inseparable. Any rule that doesn’t take this into account can never give you an accurate figure.

B. Other Factors To Consider

Of course, the matter is complicated further when we consider other variables such as market timing and inflation, or even the fact that good old inclement weather or unexpected appliance breakages can happen at any time. So maybe you used the Square Foot Rule and set aside $4,000 for this year but didn’t take into account that your roof was getting old and a winter of severe snowstorms has finally caused it to begin cracking. You might need to spend $10,000 just for a replacement. Craziest part is, the year after that you may not have a need for many upgrades at all and so your costs could hover around $2000 or less. But don’t start pulling your hair out just yet. The good news is that if you know the main factors that could impact your total cost, you can work these quite handily into your calculation. To give credit where it’s due, we derived the basis of this formula from another savvy homeowner’s site and gave it a little Delaware makeover for maximum accuracy. Here’s how you do it.
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1. Determine Your Starting Figure

There are three steps to our refined calculation.

Step 1 is to take the average of the 1% & Square Foot Rules and let it serve as your starting point. Using our example above, where the total purchase price of our
home was $250,000, let’s further assume that the total area it covers comes out to about 2000 square feet. When we average these out, we get a total of $2,250.

2. Determine Your Adjusted Figure

Next, you’ll want to add an additional 10% ($225 in our example) for each factor that is likely to adversely impact your maintenance costs. Simply go through the list below and check each variable that applies to you.

i. Age: Was your house built within the last 10-20 years? If so, it is considered a New Construction. Thanks to recent advancements in home building technologies, New Construction homes are typically far more robust than older houses, especially when we’re the ones who built them. But if your home is 25+ years old, you should count that as a liability and add 10% to this year’s fund..

ii. Condition: As mentioned above, age doesn’t automatically equate to big maintenance bills. It is entirely possible that a home built in 1850 may need less repair work than a home built 20 years ago If the previous owners took superb care of it all throughout its lifespan. While that situation is very unlikely, you’ll want to keep it in mind while working out your budget, especially if you’ve got an older house.

iii. Location: Was your house build 100 feet from the high tide line in Rehobeth? It’s going to need more upkeep and protection against water damage than a house constructed on a hilltop in Mt. Cuba. A house with an adjoining woods may be more prone to a larger variety of pest invasions than a
house in the suburbs. Consider the particulars of the land upon which your home was built and add an additional 10% for each of the structural damage hazards the location might pose. It is sometimes helpful to peruse your home insurance policy and look over the specific areas of damage it covers. After all, while these things should ideally be covered in the policy, they still provide an important list of red flag indicators that may be specific to your area.

iv. Size and Type of Construction: We recommend dividing this criterion into three categories:
a. Townhouses
b. Single-family homes (three bedrooms or less/two bathrooms or less)
c. Larger homes (4 bedrooms or more/3 or more bathrooms)
A single-family home should receive an extra 10% since you will have to maintain the exterior yourself rather than having it covered by an HOA. Larger homes should receive a 20% addition to the fund since they are typically built in areas where neighborhood committees impose higher standards for the upkeep of the home’s exterior and adjoining property.

v. Weather Conditions: This category dovetails somewhat with insurance risks associated with location but here we are referring to long-term exposure to the elements rather than their short term risk potential. In Delaware, we experience all four seasons. The constant cycle of heating and cooling down through the years will place strain on the home that will accumulate throughout that time. While some newer homes are built with highly intensive weather-proofing from the outset, older homes are not so sturdy in this regard. Regardless of age, we still recommend you assume the worst and add a further 10% under this category.

Now let’s assume you’ve got a 30-year-old single family home that’s been kept in good condition, and which is located on the waterfront where seasonal flooding could pose a potential threat this year. You will have checked off four categories and will, therefore, add 40% (that is, $900 to your starting figure. Your adjusted figure now comes out to $3,150.

3. Add In Upgrade Costs To Determine Your Total Annual Budget Figure

The last step is to factor in each appliance upgrade you are likely to make this year. In order to do this, you’ll need a detailed list of all major household components and their estimated lifespans. Good news is, this list has already been made for you by the good people over at This Old House. All you have to do is look it over and place a checkmark next to each item that is coming up on its final year of expected use.

Let’s suppose you lucked out this year and the only items on your expiration list are the garage door and refrigerator unit. The garage door will cost you between $425-$1,270, while a new fridge typically fetches for about $350-$2,000. How much you choose to spend is entirely up to you but for our purposes, we’ll assume you’re going to spend $1,000 on each item. This brings your grand total to $5,150.

Now, if that number or the one you came up with for your own yearly budget haunts your dreams, don’t worry. That’s where next week’s post comes to the rescue. Be sure to join us for the conclusion to our Strategic Savings Guide where we walk you through the entire list of home components and show you some clever ways to save money on your upgrades while investing in a financially sustainable future for your home.

Meantime, if you haven’t read our previous SSG installments, be sure to check them out below. See you next time!

Strategic Savings Guide Part 2: Maximizing Your Home’s Energy Efficiency

Strategic Savings Guide Part 1: Making the Most Out of Your Tax Return