Have you ever started a workout regimen after a few weeks, months, or even years (no judgement here…) of little-to-no physical activity?
How did you feel?
Tired, sore, and ready to give up, right?
I know, because I’ve been there more times than I care to count!
Funny thing, though. After a few weeks of getting back into a routine, I start to feel energized, the pain subsides, and I’m actually excited to stay on track.
That’s because I’ve gone from starting at square one to maintaining.
Everything we have requires maintenance. Nothing just goes on and on without a few tune-ups along the way — our bodies and material possessions are no exception.
People require doctor appointments and dental cleanings, cars need oil changes and tires, and houses need painting and repairs.
Taking good care of your belongings helps extend their lifespan and (hopefully) minimizes the total amount of money you’ll spend in the long run.
The challenge is, maintenance does add up and if you’re unprepared your wallet can take a big hit.
Since, by definition, maintenance is not an emergency, pulling from your emergency fund is not the right way to deal with these small and on-going repairs. Going into credit card debt is another no-go. However, ignoring maintenance altogether only means that eventually, you’ll be looking at a much higher bill when something (or everything) breaks completely.
So what do you do if you want to keep your car running well, your household items operating smoothly, and still manage your money well? The answer is: a maintenance savings fund. Think of it as an emergency fund for your ‘things’ — making all of those repairs easier to afford.
Here’s your big takeaway: if you have an expensive item, be sure to budget for its upkeep.
The problem is, few people actually have a maintenance fund. We tend to focus (and therefore spend our money) on what’s right in front of our face, rather than think long term.
These habits make it hard to save for new tires, or for re-seeding the lawn each year. It’s a vicious cycle, and one that a maintenance fund can help break.
Mind you, this isn’t just some theoretical advice that I’m trying to sell you on because as a financial advisor I’m supposed to.
No, we actually live this!
In fact, as of this writing, the first new car either of us ever bought – a 2000 Ford Explorer – is in the shop on it’s last leg. With over 234K miles, and doors that don’t quite work the way they should, we aren’t sure that we can fix the power issue it’s having. It may just be time to let it go.
And that’s fine because we’ve had this car for 17 years. Over the last nearly two decades, we’ve put money into maintaining this car, and we’ve extended it’s life with us.
I have to say, we have loved this car and keeping it for 17 years is pretty extraordinary!
This was due in large part to our maintenance fund.
At a minimum, a maintenance fund can help you have enough money on hand to pay for the annual upkeep your life requires. Not to mention, it also keeps you out of debt, and provides peace of mind.
By now you’re probably thinking, “okay, Pam…I got it! I NEED a maintenance fund. But how much should I save and keep in there?”
The answer: it will depend on your lifestyle, but a great place to start is with $2,000. That’s enough money to pay for something like replacing your car’s timing belt (which can easily cost $600, but is necessary to keeping your car going for longer), and be able to replace a refrigerator or stove. With savings, more is always better so here’s a good rule of thumb to send your maintenance fund into growth mode.
Take 10 percent of your monthly mortgage payment, and set-up an auto transfer into a high-yield savings account. For example, if your mortgage payment is $1,000, aim to put somewhere around $100 per month into your maintenance fund.
Chances are you won’t need to dip into this fund all that often, but the idea is to grow the balance as much as possible and use it to cover unexpected costs that may arise. That way when something breaks, needs to be repaired, or even replaced, the money will be readily available and won’t affect the rest of your budget.
So tell us: do you have a maintenance fund? If not, what’s getting in your way?
Pamela J. Horack, CFP® of Pathfinder Planning LLC provides personal financial planning advice and asset management for a simple fee to young adults and working families in North and South Carolina through group classes, one-on-one planning, and ongoing advice.