As someone who's spent way too much time shoving all my worldly possessions into cardboard boxes to move rental apartments, I know that the only fun part about relocating is outfitting a new place to become your own. It's also the silver lining of slogging through the homebuying process, considering the exhaustive time, effort and money it takes to finally sign on the dotted line. But just how much you spend on the post-move-in extras might surprise you.
A study from the National Bureau of Economic Research found people on average spent $5,000 on new furnishings, renovations and upgrades after buying a home. That's a lot of IKEA couches.
Here's your game plan for handling this unexpected expense:
- Budget for It: $5,000 might seem like small potatoes compared to the down payment and closing costs you just dropped, but you'd be well served to account for these fun extras in your homebuying budget from the start.
- Expect to Spend More With Time: Researchers found home-related spending starts to tick up about three months before you actually buy your house and continues for up to a year after moving in — and your first month will likely be the steepest.
- Factor in Fixer-Upper Costs: Those under 35 and households earning $57,000 or less tended to spend more on making their new house a home, possibly because younger homebuyers go for houses that need more inside work from the get-go.
- Consider Your Custom Needs: But owners of newly constructed houses aren't much better off, either. "People may move into a house with all new appliances but may not like how they fit with the décor, so they’ll replace them," the study's co-author, Ephraim Benmelech, told MarketWatch.
- Be Ready for Surprises: Beyond a new living room sectional or washer/dryer, sudden home repairs can pop up even in the newest of buildings. "Being a homeowner often comes with surprises, like a burst pipe in the middle of the night that needs to be fixed right away," says financial planner Tom Gilmour, CFP®. "So you need to be financially ready for these surprises, which means you shouldn’t deplete your emergency fund for expenses like furniture or remodeling."
Budgeting ahead of time means you can rest easy when you want to upgrade your IKEA furniture — and then some — after moving in.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNERTM and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.