Contributed by CompareHero.my
IT is important to establish a budget to keep your financial life in order. Not every spending of yours gets budgeted for, and this defeats the very reason of creating one in the first place.
Budgets work best when all your money is accounted for, categorised and allocated.
Many of us know that we need to budget for bills, loans and other monthly commitments. However, when it comes to household budgets, there are a few expenses that we tend to overlook.
While every homeowner’s situation is unique, here are the ones that you should pay attention to:
Repairs and Maintenance
A popular rule of thumb says that 1% of the purchase price of your home should be set aside each year for ongoing upkeep and fixes. For example, if your home cost RM500,000, you should budget RM5,000 per year for maintenance.
It doesn’t mean you’ll spend RM5,000 every year. It just means that on average you’ll spend around RM5,000 annually. Some years you’ll spend more such as a roof repair costing RM6,000 to RM10,000 or more. In other years, you’ll spend far less such as spending on the annual pest control services.
Residents Association and Security
If you live in a gated neighbourhood or a secured building, you will likely be part of a homeowner’s association or residents group, which sometimes does come with fees that can cost several hundred ringgit a month. Even if your fees are due annually, budget the amount each month so you’re not hit all at once.
Pet Expenses
Some pets can cause havoc within your homes such as ripped or chewed furniture, garden holes, uprooted plants, unchecked urination and even environment (the air in your home) problems caused by pet hair and dander. Not foreseeing this in your budget would result in a lot of financial complications to go along with the emotional stress brought. This shouldn’t cost too much but better be safe than sorry.
Renovation and Upgrading Expenses
Many homeowners enjoy fixing up their houses, making it more comfortable to live in and significantly increase the value of it as well. Renovations can cost a lot of money, and many feel a bank loan might be the most suitable form of financing home improvements. Instead, consider staggering smaller home projects paid with the money you’ve saved up from budgeting.
Alternatively, you can plan to make smart home improvements with the right credit card. Many major credit cards offer zero interest instalments or low interest easy payment plans (EPP). While reward credit cards or cash back credit cards might also provide valuable rewards that you can apply toward your next improvement (or to help cover your other expenses). Just make sure you estimate the monthly expense into your budget.
Insurance
Owning a home does cost a lot of money. The housing loan eats up the biggest chunk of your budget, but you should strongly consider a home insurance. It protects your home, which may very well be your largest investment and gives you a sense of security. If you can budget for an insurance policy to cover structural, fire, household contents and liability coverage, then you’ll attain peace of mind should anything bad happen.
Another type of insurance you may want to consider is the mortgage insurance.
There are two types available – Mortgage Reducing Term Assurance (MRTA) or Mortgage Decreasing Term Assurance (MDTA) and Mortgage Level Term Assurance (MLTA). These are forms of insurance for your home loan. Both offer protection for the homeowner by helping them settle their outstanding home loan in the event of illness, disability or death, protecting your family from the risk of losing their home.
Taxes
How many of you know of the property taxes in Malaysia? Once you find out the taxes you have to pay after buying a property; the cost might scare you. It would be very wise to do your homework and estimate all property taxes and evaluate it with your financial health to see if you can afford it.
The two main taxes, after becoming a homeowner, that you need to budget for:
- Property Assessment Tax - This tax is evaluated based on the annual rental value of a property set by the state government or local authority where the property is located. Rates vary according to the type of property, market rate and state of the property.
- Quit Rent - Applicable to landowners, both freehold and leasehold, and homeowners of apartments, condominiums and other property that are under strata titles. The rates of quit rent may vary between respective states and even within the same state.
As you’ve read, it can be easy to overlook these little things in your home, but these are things you need to work on if you want to have an efficient way to manage your finances. Always anticipate the worst, and you would be better equipped to handle it when it does come. Be more thorough in your budgeting and your life would surely be far better for it.
This article is contributed by CompareHero.my, a website comparing credit cards and personal loans in Malaysia.
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