As a homeowner, home repairs and major issues crop up from time to time, and you need to find additional money for them. Many times, these can present as emergencies, leaving you scrambling to find a quick solution to remedy the problem.
While numerous credit options are available for homeowners in the UK, being able to cover some or all of the costs yourself can be a game-changer. It can help you avoid taking on additional credit, which can strain your finances. Sinking funds are a practical solution, allowing you to be financially prepared for unexpected expenses.
What Are Sinking Funds?
Let’s delve into the hero of your financial planning – the sinking fund. Simply put, these are pots of money you hold in different savings accounts, each designed for a specific purpose. The idea is to set aside a small amount of money regularly for a specific future expense, such as a new boiler or roof repairs. The mere presence of these funds, regardless of whether you’ve used them before, can be a lifesaver in times of emergency. You won’t need to dip into a general rainy day fund or take money allocated for other needs to afford to fix the issue at hand. This sense of security is invaluable.
So, why should you consider sinking funds? They are as versatile as you need them to be. You can set them up based on average costs and adjust your contributions as needed. If you don’t end up using the funds, you can reallocate your savings or adjust your contributions towards something else until you need to dip into it. This adaptability ensures that your sinking funds are always working for you, giving you a sense of control over your finances. The peace of mind that comes with knowing you’re prepared for unexpected home expenses is a significant benefit of sinking funds.
But how do you go about setting up a sinking fund? As a homeowner, here are some practical steps to get you started. First, identify potential future expenses such as a new boiler, roof repairs, or structural problems. Then, estimate the cost of each item by researching the average costs in your area or consulting with professionals, and decide how much you can comfortably set aside each month. Open a separate savings account for each expense and set up automatic transfers from your main account.
Read on to discover four sinking funds all homeowners should consider starting.
New Boiler
The cost of a new boiler can run into the thousands of pounds, and that’s before you add on installation, too. When it comes to choosing an electric boiler, or a gas-powered one if you prefer, there are many things you need to consider, such as fuel consumption, output, style, and additional features and settings. The more advanced your boiler, the more it will cost.
Setting up a sinking fund for between £1,500 and £5,000 can enable you to cover the cost or part of the price of a new boiler should your current boiler reach the end of its lifespan. In addition, you can increase the fund to cover any maintenance or services required so you don’t end up out of pocket when these are required, too.
New Roof or Roof repairs
In the UK, replacing a roof costs over £5,000 on average. Of course, this varies depending on the ideals of your roof, the size of your home, and the complexity of the roof design.
Roof problems can seriously impact your home’s structural integrity and living conditions and make for an unpleasant time, especially during the winter months. As your roof is your home’s main force of protection against the elements, it’s vital it’s in the best condition possible throughout its life. Typically, you can expect a roof to last around 20 to 25 years, so this isn’t something you need to worry about too often. However, repairs can crop up at any time. The sinking fund dedicated to getting your roof fixed, inspected or even learned can be beneficial and help ensure your home is protected all year round.
New Windows and Doors
Finding an issue with your windows can be extremely concerning; however, like any other building materials, they’re subject to wear and tear, and over time their functionality can decrease or they can become damaged. As a homeowner, replacing your windows and doors can be a costly endeavour, so having a sinking fund to help cover some or all of the costs can be greatly beneficial, especially if finances are tight. Damaged windows and doors can not only increase noise pollution inside your home but lead to an increase in energy bills and reduced security for your home. Getting fixed or replaced sooner rather than later is a must. On average, between £500 and £1,500 per window will be sufficient to move towards a sinking fund for new windows and from £500 to £1,500 for each exterior door.
Structural Problems
What will you do if your home is subsiding or the foundations have cracked or shifted? While this isn’t something most homeowners need to worry about, in some cases, buildings can experience structural problems ranging from minor to severe, impacting your ability to live on the property.
And it’s safe to say remedies for structural repairs can run into the thousands of pounds once you’ve got structural engineers to determine the issues and contractors to fix them, not to mention the additional living costs if you need to move out for work, the cost can quickly add up. A sinking fund dedicated to structural repairs can be beneficial if your home has known faults or is at risk of developing issues like this or if you simply want to pre-empt problems moving forward.
While not extensive, these four repairs for your home can be expensive for homeowners and cause a lot of concern should you encounter them, not to mention the cost. Sinking funds are a great way to help you afford to cover the cost of repairs or replacements worth struggling financially or roasting to taking on additional credit to carry out the work.
