The Home is an Asset, an Expense, and a Risk

The following is a guest post about home finances. If interested in submitting a guest post, please read my guest post policy and then contact me.

The home is most people’s largest asset but it usually gets neglected from a financial management perspective.  People naturally think of the home as a place to live, to entertain, to raise kids, and create memories.  But it is important to turn our attention back to managing all your home finances from various aspects as it makes up a huge percentage of people’s assets and expenses.

First is thinking about the home from an overall financial value.  There are a few key figures that you should track such as the purchase price of the home, i.e. what was the agreed upon price you bought the home for.  Next is to know what the tax assessed value is, as this is often times different and it is the value that your property taxes are based on.  If you recently re-financed, you should also have an appraised value.  You should also know your building insured value from your homeowner insurance policy in case of disaster.

From a risk perspective, most people don’t know the total value of their possessions.  As a result, they are usually under-insured especially due to collectibles and other expensive items that need a special rider.  But adding up the value of all your items is not enough.  You also need pictures, receipts and other documents for a home inventory as proof for reimbursement if a burglary, fire or other disaster were to happen, such as Hurricane Sandy, midwest and southern tornadoes, west coast wild fires and floods.

Home maintenance “fix it” and replacement costs come as a big surprise to many people.  Materials and equipment wear out and break down sooner than people expect because they forget the seasonal and annual maintenance tasks.  Not performing these tasks also starts to erode the value of the home which can affect the selling price when people decide to sell the home.

So budgeting for maintenance costs is not enough.  Homeowners need a maintenance schedule for their home that reminds them of all these tasks because most people forget or they are not aware of all the things they should be doing.  It is also important to track the actual costs as well as documents and receipts from third party service providers who often perform some of these tasks.

Home improvement projects are a big part of many people’s homes.  These projects have multiple financial perspectives that need to be managed.  The first is creating a budget for all their desired projects.  People end up being over-budget on projects because it is very often the first time they have ever managed one, like a bathroom or kitchen remodel.  They don’t realize how many items they will need for these projects, they don’t shop for enough product alternatives, and they don’t balance what they want versus what they can afford.

Tracking the actual costs of each home improvement project is also important to know the tax basis you have in the home, especially when you sell the home in the future.  Another reason to track these costs is for insurance purposes.  People are also under-insured because they improve their home, but they don’t update their home inventory and discuss these improvements with their insurance agent.  In addition, having proof of these improvements can help justify your selling price for the home in the future.

So with all these different financial aspects of home, how do people manage this asset?  Many people use a combination of multiple spreadsheets and electronic and paper documents stored in multiple places.  Many don’t use anything at all, yet this is their largest asset in their personal portfolio!

HomeZada is a new online personal finance solution that is dedicated to managing the various financial aspects of a home.  It is an all-in-one solution that manages the home asset values, the maintenance costs, the home improvement budgets, cash flows, costs and home inventory values.  The solution helps consumers save money on managing the expense side of home, protects them from a risk perspective, and helps maintain or improve the asset value for future a re-sell.

The solution goes beyond just the financial numbers.  It provides an automated maintenance schedule of common tasks that people forget or are unaware of and alerts the homeowner when these things need to get done.  It also provides a way to save online and offline shopping research for home improvement projects.  It also is a data storage solution to save photos, documents and receipts for your home inventory and important property documents.  You can learn more about the solution by visiting the HomeZada site.

When it comes to managing money, the natural tendency is to manage your investment, retirement, credit, and bank accounts.  Isn’t it time to also have a solution to manage the expense, risk, and asset perspectives of your home?

John Bodrozic