When It Rains, It Pours: Why Smart Homeowners Plan for the Unexpected
The Hidden Costs of Homeownership (And How to Handle Them)
As a financial advisor and climbing enthusiast, I've learned that both mountaineering and homeownership share a crucial principle: always have a backup plan. Recently, I planned a climbing trip to Red Rocks down to the smallest detail—only to have rain make climbing impossible for most of the trip. Instead of letting the weather defeat us, we used the time to scout routes for future visits, turning what could have been a disappointment into valuable reconnaissance.
This experience mirrors the truth about homeownership, which my business partner Adam and I learned the hard way: unexpected challenges will arise no matter how well you plan.
The question isn't if you'll face a housing emergency, but when—and how prepared you'll be when it happens.
When Home Surprises Strike
Over the past 12 months, my family has experienced three separate (and unrelated) surprises.
First, in January 2024, during the “Big Freeze,” our water heater bit the dust – a $5,000 expense that neither of us was expecting.
Shortly after that, we went on a family vacation. Upon returning home, after a grueling 24 hours of straight travel to get back to Portland, we found out a toilet had overflowed while we were away. There was water upstairs and downstairs – amounting to a ton of necessary remodeling.
Luckily, after quite a bit of back and forth with insurance, we were able to cover most of the cost – but still owed some out of pocket.
Finally, we closed 2024 with a pipe between the water meter and our house springing a leak. So, in December, we had another unexpected $6,000 expense.
Adam faced an even more daunting challenge when he discovered mold in his house, requiring extensive (and expensive) professional remediation. All in, he’s looking at a $50,000+ out of pocket expense – and that’s after insurance. Plus he and his family will need to move out for 3-5 months.
Yikes!
2024 was a rollercoaster ride, and not every year will be this way. It’s true that homeownership delivers many benefits and comforts to both Adam and I’s families. Yet, it’s entirely possible that one (or both) of us would have wound up in debt if it wasn’t for the money we had set aside expressly for home repairs.
These experiences reinforced valuable lessons about homeownership that we share with our clients:
Create a Home Emergency Fund
Just as you need an emergency fund for personal expenses, your home needs its own dedicated savings account. A general rule of thumb is that annual home maintenance costs run about 1% of your home’s value. At North Ridge, we build this into most client plans by default. We recommend setting aside 1-2% of your home's value annually for maintenance and unexpected repairs. For a $500,000 home, that means saving $5,000-$10,000 per year. Now, you may not spend this every year – but when a big expense hits (a la Adam’s mold nightmare), you’ll be prepared.
This isn't just about having money for emergencies—it's about peace of mind. When you have dedicated home funds available, a midnight call about a burst pipe becomes an inconvenience rather than a financial crisis.
Know Your Home's "Vital Signs"
Take inventory of your major home systems and appliances:
How old is your roof?
When was the last time you had your HVAC serviced?
What's the age and condition of your water heater?
Is your house plumbed with galvanized, PVC, or pex pipes? If galvanized, how old?
Have you checked for signs of water damage or mold recently?
How old are your fixtures (toilets, sinks, showers/baths) and are they working properly?
Understanding these "vital signs" helps you anticipate and plan for replacements before they become emergencies. That toilet that flooded my house? In retrospect, it was old, and we had not checked the overflow pipe to make sure it was set at the correct height. That was a hard lesson to learn.
Planning for Improvements, Not Just Emergencies
Home ownership isn't all about averting disaster—it's also about making your space better suit your needs. But here's where many homeowners go wrong: they treat renovations as spontaneous decisions rather than planned investments.
Just as you wouldn't attempt a challenging climbing route without proper preparation, you shouldn't jump into home improvements without careful planning. We recommend creating a separate savings category for desired renovations, distinct from your emergency fund.
This two-bucket approach ensures that:
1. You're prepared for unexpected repairs without derailing your improvement plans
2. You make renovation decisions based on careful planning rather than impulse
3. You can take advantage of opportunities when they arise (like a contractor offering a great off-season rate)
The True Cost of Home Ownership
I recently read an article in the Wall Street Journal that had an interesting statistic that stood out to me –
The average cost of insurance, home maintenance and repairs, property taxes, and utilities was approximately $1,180/month in 2023. That’s on top of your mortgage payment which, according to this nifty break down, is an average of $2,738 in Portland.
Too often, people think that when they buy their home, they need to worry about a hefty down payment – and then everything else is smooth sailing. However, if Adam and I’s experiences showed us anything, it’s that “smooth” is absolutely not how homeownership is typically defined (even on the best of days).
This is why it’s particularly important to work the cost of homeownership into your overall financial plan, especially if you plan to retire at your current property – or stay there for a long period of time.
Making Your Plan B Work for You
Remember my rained-out climbing trip? Having a backup plan turned what could have been a waste into a valuable experience. The same principle applies to home ownership. Build flexibility into your plans:
Keep some funds liquid for immediate needs
Maintain good relationships with trusted contractors who can respond quickly
Stay informed about your home insurance coverage and what it does (and doesn't) include
Try to avoid more than one homeowner insurance claim in the same year. If the claim is small, consider paying out of pocket. My insurance wanted to drop me after two claims in one year, and that’s not unusual.
The Bottom Line
Homeownership, like any great adventure, comes with both challenges and rewards. The key to success isn't avoiding all problems—that's impossible. Instead, it's about being prepared for the challenges you'll inevitably face.
By maintaining dedicated savings for both emergencies and improvements, staying aware of your home's condition, and always having a backup plan, you can handle whatever homeownership throws your way. And when you're properly prepared, you can focus on what really matters: making your house feel like home.
Want to create a solid financial plan for your home? Let's talk about building a strategy that protects your investment while planning for the future you want to create.