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January 5, 2012

Homeowners need to consider maintenace and repair costs!

Whether it is called cash-flow planning or budgeting, it is an important exercise.  Determining a reserve fund is an essential part of the process.  The goal of a reserve fund is to prepare for the unexpected.  Unexpected costs and unknown nature of repair and maintenance associated with home ownership must be factored into the establishing your reserve fund.
The timing of reoccurring expenses such as: mortgage payments, utilities, insurance, real estate taxes, community fees, etc. can be anticipated.  Expenses such as; new furnishings, new window treatments, lawn  care, etc. can generally be planned. 
The timing and amount for items such as: water damage; heating, ventilation,air conditioning; roof damage; tree damage and window damage are examples of expenses that are unknown.
Tracking expenses give you an idea how much these types of expenses you incurr annually.  The age, type of construction, location and topography are factors that could impact the amount you need.  I have seen surveys that suggest a range of between 1% and 5% of the value of your home are typical.  The articles linked to this post suggest 1% to 2% and 1% to 3%.  Yin need to consider your situation as to how much you should reserve for.

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