Financial Plans After Buying First Home

By on July 24, 2015


Buying your first home can be a huge undertaking. You’ve taken that important step and invested your life savings into a home. You know at this point after taking care of down payments, mortgage, tax and insurance along with those closing costs you are lucky if you have enough for decorating the place let alone any plans for dinner out soon. But even with all these costs, your financial plans are really just beginning. You want to make some smart moves now to ensure that your investment is protected. To do this, creating financial plans and sticking to them is important for future security. Here are some key steps any home owner should be considering.

Start Your Rainy Day Fund

We can’t predict the future. If you should become seriously ill, lose your job or have some other catastrophe happen, can you continue to make your mortgage? If you have a financial advisor the first suggestion they will make is instituting financial plans for a contingency account to protect your investment.  Start setting a percentage of your paycheck aside in a special account just for this. Rule of thumb is to have five or six months of basic income set aside.

Keeping a Roof Over Your Head

While it isn’t always the roof that needs repair, this type of expense is now your responsibility. Your financial plans should include putting aside enough to cover any major repairs that should crop up for your new home. The basic rule for this is to set aside around 2 percent of the value of your new home for repairs and as an emergency fund for the house.

The Importance of Life Insurance

You have just completed the largest purchase you will ever make in your life. While you may not have considered life insurance before, it will help to protect your spouse and family should anything happen to you. With life insurance they can be assured that in the event of your death they will continue to be able to pay the mortgage and not lose the home. Make sure that your financial plans include term life insurance sufficient to cover all expenses including the mortgage for at least a year. Your spouse will need that year to care for your children and make plans. Even if you already have life insurance, the purchase of a home means you should call your agent and evaluate if your coverage is still sufficient.

Financial Plans – Disability and Retirement

These are probably two areas you aren’t even considering and should. Many home owners don’t consider getting disability insurance and yet a third of the workforce will need to collect disability before they retire. Something as simple as a car accident can leave you unable to work for the rest of your life. Without disability insurance how would you pay the mortgage? By the same token, while retirement may seem a long way off, putting money aside now for it means being able to enjoy your home when you retire.

Many couples consider their home a vital part of their retirement plan. While this can be true, it is still important to continue to contribute to any company-sponsored 401(k) plans and set aside as much as you can for an IRA or Roth IRA. You may find the first few months financially draining after your home purchase, but retirement plans still need to be financed too. Your financial plans should continue to include all of these elements to keep that investment safe and your family well cared for in the event of life changes.