Your home is typically your most valuable asset, which makes taking care of it especially important. Unfortunately, even the most diligent homeowners will often encounter unexpected home expenses. These can feel overwhelming, but it’s critical to approach them in the right way, both for the sake of your home and your wallet. Whether the repair is an emergency or something that can benefit from a more measured approach, here are 11 steps for tackling unexpected home expenses.
Step 1: Don’t panic
When water is gushing into your basement from a broken pipe, it’s challenging to remain calm. This can be true even with less dire situations, such as a malfunctioning appliance. But panicking to address an unexpected repair doesn’t help anything and can actually cause more damage if you rush to fix something without the proper tools. Take a deep breath and move on to step two.
Step 2: Assess the situation
Start by determining the severity of the issue and how urgently the repair is needed. Will a minor problem quickly become major if not fixed immediately, or can you take a couple of weeks to gather your resources and proceed? Could the issue cause other problems as a result? How much is it affecting your daily life? Consider these questions carefully before moving forward. If necessary, get help from experts to understand the full scope of the situation.
Step 3: Check your emergency fund
Because the cost of owning a home goes well beyond its price tag, you hopefully have managed to set aside a few dollars here or there to build an emergency fund. If that is the case, take a look and see how much money you have on hand in that fund as you size up your options to resolve the issue.
Step 4: Prioritize repairs
Sometimes, one unexpected home expense snowballs into another. Consider that potential pipe leaking into your home. Not only will you have to repair the pipe, but you’ll also need to fix any damage caused by the water. Prioritize your repairs from most urgent to least as your budget allows.
Step 5: Get multiple estimates
It can be tempting to take the first estimate you get. After all, with the repairman standing in your living room, it’s easier to get them to commit to a time and date, which means your ordeal will be over sooner. Still, resist that temptation and get at least three quotes. You might find wildly different estimates for the repair and the time it will take.
Step 6: Consider a DIY approach
When dealing with significant or structural repairs, it’s vital to use an appropriately licensed and insured contractor to avoid unscrupulous or potentially unqualified vendors. However, homeowners with some DIY skills (or their handy friends) can tackle many other smaller projects or problems, from repainting to minor plumbing fixes. This can save you hundreds of dollars in labor costs.
Step 7: Check your homeowners’ insurance and home warranty coverage
While homeowners’ insurance won’t pay for everything, there are some cases where your policy covers an unexpected home expense. The same is true for a home warranty, which may not cover the damage caused by a burst pipe but could cover the replacement of the pipe itself.
Step 8: Ask for a payment plan
Contractors and service providers want to provide experiences that create loyal, repeat customers who refer them to their friends and family. Many businesses large and small offer payment plans or financing options to help you afford an unexpected expense not covered by an emergency fund or insurance policy.
Step 9: Use credit carefully
These days, the typical interest rate on credit cards can reach nearly 30%. For homeowners with plenty of plastic, it can be tempting to swipe your expenses to the back of your mind. Resist this urge. If you must use credit or take out a loan, consider tapping into your home’s value with a home equity line of credit (HELOC). A HELOC is tied to the value of your home and is paid off if you choose to sell.
If a credit card is the only option, look for a 0% APR credit card or balance transfer that you can pay off before interest kicks in. Be aware that interest on these cards begins to accrue when you make the purchase, and if you don’t pay it off, it gets added to your balance (and then begins to accrue more interest).
Step 10: Start (re)building your emergency fund
The best way to protect yourself from unexpected home expenses in the future is to start rebuilding your emergency fund as soon as you tap into it. The key to this is consistently depositing money to a separate account. Look for a high-yield savings account connected to your regular checking account. Set up an automatic transfer every month. Even $10 at a time will add up.
You can also look for a temporary side hustle [1] and dedicate those earnings to boosting your home’s emergency fund.
Step 11: Learn from the experience
Some unexpected home expenses are the results of minor repairs put off for too long or regular maintenance that was neglected. Keep on top of any maintenance or repairs as they arise to avoid future emergencies.
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