Advice and Opinion

Home owners: how to be prepared for the unexpected

Estate Agency generic

Owning a home is a long-term commitment that can span a lifetime. While we all hope for the best, it is likely that at some stage during our lives, a home emergency of some kind will strike, so it is best to be prepared. “Being prepared for the unexpected is part of owning property,” says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.

“While it may be impossible to determine when it will happen, the eventually of something needing to be repaired on a home is a certainty that home owners need to consider and prepare for. Putting aside money each month in some kind of contingency fund will provide home owners with a financial cushion and assist them in avoiding going into debt when a crisis strikes.”

He adds that on average the typical buyer of a single-family home will remain in the property for around 13 years – often longer. “I think it is fair to say that a lot can happen over a decade or longer. Having a plan of action in place will help homeowners to tackle whatever life throws at them and keep going. The goal is to have the means to address the changes or emergencies that occur, without it jeopardizing the home ownership or placing the homeowner under severe financial pressure,” says Goslett.

According to Goslett, there are emergencies that happen to the house itself, such as roof repairs or rising damp, both of which can be a massive financial expense, and there are the financial emergencies that affect the home owner, such as job loss. “The question every home owner should ask is if something like this happens, would I still be in a position to afford the home? For the majority of home owners, the answer would probably be no, which is why a contingency fund is imperative as a home owner,” advises Goslett. “While the idea of putting money aside can be a daunting task, especially with the constantly rising cost of living, the consequences of not having a financial cushion to fall back on will be far greater.”

Goslett says that in essence there are three basic steps that home owners need to take to start creating an emergency fund. This will provide them with a safety net that will assist with any obstacles that come their way, regardless if it is something as big as losing their job or as trivial as a leaking toilet.

Determine the required amount

As bare minimum home owners should aim to save approximately one month’s salary, however, in an ideal situation, six months’ income in saving is preferable. “A six-month financial cushion should see homeowners through most crises that arise. That said, saving up half a year’s worth of income will be no mean feat, it will take a fair amount of time and planning to achieve. Setting smaller goals along the way will ensure that home owners maintain focus and stay motivated,” says Goslett.

Choose a saving vehicle

When wanting to build up a significant amount of savings, selecting the right savings account is crucial for success. Interest rate yields will vary from one account to the next, so it might require some research to find the right product that will yield the greatest return while meeting the criteria. Often the savings accounts with the highest interest rates will require the account holder to lock their money away for a certain fixed period – this could be problematic to a homeowner who requires the money in an emergency. The interest rate, as well as accessibility, will be key factors to consider.

Automate the savings

Setting up a monthly automatic transfer will make the process far easier and will help homeowners remain disciplined with savings. If predetermined amount of money is transferred into a savings account automatically each month, it takes the decision-making process out of the equation and ensures that a contribution is made towards the contingency fund regularly with very little effort on the homeowner’s part.

“Setting money aside each month is the best way for home owners to prepare for and deal with an emergency situation without being forced into debt. A contingency fund will help home owners be ready for the unexpected while building a solid foundation for their financial security and independence,” Goslett concludes.