A financial checklist for new homeowners

No matter how old you are, or how many homes you’ve purchased, there’s something about signing your name (over and over again) on the closing contract that makes you feel like you’re taking a Really Big Step into responsibility. That’s because you are!

A home is an emotional and financial investment. The new financial normal can be hard to find, and upfront costs related to homeownership may make you feel strapped for cash.

Because buying a house — no matter how financially responsible you may be — can throw your finances off-kilter, at least temporarily, it’s important to not panic, but also get them back on track. Making these five moves, alongside any renovations or redecorating, can help ensure that you keep your financial goals even as you settle into your new home.

Get your emergency fund back on track

Buying a new house can be a severe drain on your emergency fund. Chances are the day after you closed escrow your emergency fund had a fewer 0’s than when you started.

Now that you’re a new homeowner it’s time to revisit your budget and work on rebuilding your emergency fund. Most people need a healthy three to six months’ pad of their fixed expenses (the expenses you have to pay each month) in a savings account dedicated to emergencies. If you’re self-employed, work towards six months to a year’s worth of savings.

Rebuilding is essential because new expenses will come your way as a homeowner. The only unknown is what exactly they will be. The plumbing could rupture, you might need a new roof, your toilet could spring a leak, or you might want to do renovations.

Emergency fund checklist:

If you don’t already have a high-yield savings account for your emergency fund, consider banks like Ally, Synchrony or Marcus by Goldman Sachs
Work backward to how much you need to save to rebuild your emergency fund and set a monthly savings goal to restore it in the shortest time possible
Remember to incorporate your savings goal in your budget
Your emergency fund will ebb and flow as things come up – that’s what it’s there for.
Food for thought – you can also use your ROTH IRA as your emergency fund since your contributions can be withdrawn tax and penalty free (make sure your income is within the income limitations for a ROTH) Of course, if you withdraw money from your ROTH IRA early, you may limit the growth of the account for the future.

Think about life insurance

As a new homeowner, there are lots of extra costs flying at you — taxes, insurance, maintenance, lawn care and so much more. One expense you might not think about is the financial cost to your family if you (or your partner) were to die unexpectedly. That’s where life insurance comes in.

If you’re married, or in a relationship, the unexpected loss of one of you could be a real blow to your family’s finances. You could face lost income or new expenses like childcare. All of these costs can deplete your savings and put your ability to keep up with mortgage payments in jeopardy.

The cost of life insurance to provide a layer of financial peace of mind, however, could be very affordable. For example, a 35-year old woman in excellent health could but a 30-year, $500,000 term life policy for $32.08 per month.

Who needs life insurance?

Life insurance is a smart move when you have people in your life who depend on you financially.

Term life insurance is an affordable type of coverage that covers you for a set period of time — 10, 20 or 30 years.
You can purchase term life insurance for a death benefit that’s at least the full amount of the mortgage and for the length of the loan. Most new homeowners will need a 30-year term length.
How much life insurance should you get? Factor in your mortgage, as well as ongoing expenses like childcare, household maintenance, and the contribution you make — both in the form of a paycheck and the work you do around the household — to reach this number.
If you have existing life insurance through your employer make sure you know what the monthly cost is, how much of a death benefit you have, and realize that coverage will likely end when you leave your job.
Don’t forget to double check who you named as the beneficiary on any policy you have

Update your will & trust

Buying a new house is as good a reason as any to check up on your will and trust (or to get one started). That said, you don’t need to own a home to create a will, and setting one up, regardless of where you are in life, can make your family’s life easier if you were to die.

Once you become a homeowner, setting up a trust could be a valuable piece of your financial plan. A living trust is a legal written document. Your assets are placed in the trust for your benefit and protection during your lifetime, and with named beneficiaries in case something were to happen to you. The living trust is often created to help your heirs avoid probate and to provide a level of privacy and protection for your assets. One of the most common assets put in a trust is the home, as well as stocks and bonds, brokerage accounts, other real estate and money market accounts.

Will & trust checklist:

You can quickly set up a will and trust with companies like Trust & Will, Willing, LegalZoom or Tomorrow
You can also set up a will and trust with an estate planning attorney
Make sure you transfer the deed of your house to your trust, so in essence, your trust owns your home

Chat with your accountant

Becoming a homeowner is a great time to take the plunge and hire an accountant if you don’t have one already. Why? An accountant can help you get acquainted with your new financial status and advise you on various financial strategies that might be right for you, such as how many exemptions you should take. As a homeowner, you may get a nice tax deduction for the interest you pay on your mortgage. As a result, you might want to adjust the exemptions and withholdings on your paycheck to keep more money in your pocket each month and even out the interest deduction that comes at tax filing time. Your accountant can also advise you on local tax implications in the city and state where you live. For example, you may have access to a homestead exemption that provides asset protection from creditors.

Accountant checklist:

Talk to a few different accountants before you settle on “the one” to make sure you’re a good fit for each other
Bring copies of your W-2s and 1099s to your meeting with your accountant
Ask questions — your accountant is your advocate
If you decide to change your exemptions, make sure you notify your HR department

These homebuying financial to-dos may not be as visible when they’re completed as, say, landscaping the front lawn or furnishing the den, but they serve the essential purpose of helping to make sure that you’re financially prepared in this next stage of your life. Since you’re already in the zone of going through paperwork, poring over financials, and tackling the nitty-gritty, it can be as good a time as any to do a holistic financial check-up.

And you have to admit, checking off to-dos in your brand new pad can give you a pretty good sense of satisfaction.

Why life insurance

Life insurance is a financial safety net for your partner, your kids, your life...

Shannah Compton Game is a CERTIFIED FINANCIAL PLANNER® professional with an MBA and is the host of the award-winning podcast, Millennial Money, where she shares totally relatable and easy to understand financial advice that will actually make you want to talk about money. Opinions expressed by the author are their own.

Haven Life doesn’t provide tax, legal or investment advice. This discussion is intended as general education only. We encourage you to work with your own personal tax or legal professionals and your financial advisor. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel.