Some finance experts believe that owning a home is the quickest and surest way to start on the road to financial independence. Such a statement assumes a lot about the financial savvy of the average homeowner. In 2019, for example, one out of every 215 homes ended up in foreclosure. Many new homeowners never had enough money to maintain a home in the first place. Others unwittingly mismanaged their finances and become mired in perpetual first-time homeowner traps.
It is easy to get lost in the euphoria of first-time home ownership.
What’s also easy to do is to forget the need to be financially frugal.
First-Time Homeowner Traps – What Are They?
Owning a home for the first feels like freedom. So, when you feel that free, why restrain yourself?
The key to finding financial independence is saving more money than you earn. And spending frugally. Homeownership is an awesome responsibility.
Forgetting that, and the need to maintain home budgets to maintain the home, can be costly mistakes.
Every empty room feels like a blank visual canvas that must be stuffed filled with expensive furnishings.
And then, after realizing they bought too many furnishings, first-time homeowners rent storage units.
Then, first-time homeowners feel compelled to waste hundreds or thousands per call on minor repairs they could fix themselves.
Here are some first-time homeowner traps you should avoid.
Too Many Furnishings
I speak from experience when I tell you that adopting a minimalist mindset relative to home furnishings will save you money.
A home is for living in. When you are a new homeowner, live in your home! Treat it like a personal habitat and a place to create a lifetime of memories.
The problem is that Americans are consumers. Americans consumers buying things funds over 70% of the government’s operational budget.
Now why do you need to know something like that?
Because one of the prime first-time homeowner traps is to buy furnishings they don’t want or need for its own sake.
Most new homeowners see the empty starkness of a new home and aspire to fill a home landscape with stuff.
This is often done to the detriment of personal home comfort. New homeowners pack a new home with furnishings like an overstuffed obstacle course.
And this is done at great personal cost.
The typical new homeowner will spend over $10,600 on furnishings and appliances when they move into a home.
You’re better off adopting a minimalist mindset when it comes to furnishings. Have open spaces between furniture that allows you to navigate and live in your home.
Aspire to spend a few hundred to a few thousand on new furniture when moving in.
The problem with too many furnishings is that Americans don’t throw things away.
Which brings us to our next quagmire of first-time homeowner traps.
Renting Storage Units
First-time homeowners apply for a mortgage to one day own a home so they can stop renting an apartment.
After all, when you pay rent, you are just paying the bills of someone else.
So, why would you rent a storage unit after buying a home for the first time?
After spending $10,000 on furniture, appliances, gaudy velvet paintings, and other things you you don’t need, you will need to store them.
The average storage unit costs $50 to $180 a month. If you spent $180 monthly on a storage unit, that amounts to $2,160 annually.
You will end up spending about $26,000 over a decade to rent that storage unit!
A climate-controlled storage unit, which would be optimal for delicate items, costs up to $225 a month. You do the math.
The collection of material items begets more collecting. Sooner or later, the things you own end up owning you, and your bank account.
No one really plans to own a storage unit for the short-term. So, strategically and aesthetically furnish your house with less so you will have more money.
Unnecessary Repair Bills
The only drawback from owning to renting is that the homeowner becomes fully responsible for repairs.
For example, the average cost to repair a water heater is $3,000. The maximum cost can be as much as $8,000!
Unless you are highly skilled home repair expert, you have no choice but to call a professional contractor.
However, you don’t have to call a home repair contractor for every squeaky door hinge, leaky toilet, or malfunctioning toilet you encounter.
Calling a home repair contractor for every small problem is one of the worst first-time homeowner traps.
It creates a mental mindset that you must pay for every little breakdown you could potentially fix yourself.
A plumber might charge you up to $310 for an issue you might be able to fix yourself.
You might pay up to $150 to have a leaky faucet repaired.
Here is a simple 3-minute YouTube video which shows you how to fix a leaky faucet.
It won’t be hard for you to find online DIY tutorials and videos on how fix simple repairs on your own.
Look at it this way – the typical home sells for about $330,600 now. Some home experts believe you should have an annual home repair fund worth 1% of your home’s value.
That means you should add $275 in your home repair fund every month. The more valuable your home, or catastrophic the repair, the more money you would need in the fund.
Learn to become a basic handyman. Your bank account, and home budget, will thank you later.
First-Time Homeowner Traps – Avoid At All Costs
Money is a tool. When you have enough of it, you are afforded more options in life.
When you become a first-time homeowner, you feel unencumbered from renting and feel free. It’s an awesome feeling.
So, the tendency is to overdo it when it comes to home-related spending. This is a good way to fall in self-initiated finance traps.
Develop a minimalist mindset when it comes to home furnishings. This way, you won’t buy unnecessary items you will end up renting a storage unit to store.
Develop a home budget and stick to it.
Remember, one out of every 215 American homes fall into foreclosure.
Strategically maintain your finances to ensure that never happens to you.
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Allen Francis was an academic advisor, librarian, and college adjunct for many years with no money, no financial literacy, and no responsibility when he had money. To him, the phrase “personal finance,” contains the power that anyone has to grow their own wealth. Allen is an advocate of best personal financial practices including focusing on your needs instead of your wants, asking for help when you need it, saving and investing in your own small business.