Elizabeth Dodson is the Co-Founder of HomeZada, a digital home management suite of apps to manage your home, where she oversees the customer experience and strategic partnerships.
We recently asked Elizabeth for her advice on managing home finances including the importance of tracking the financial aspects of your home to make better decisions on managing, maintaining and improving your biggest asset. Here’s what she shared.
What is digital home management? How does it work?
Digital home management is empowering the homeowner to manage their largest financial asset by tracking a home inventory, maintenance schedule, remodel projects and all the home-related finances. Homeowners go through cycles of homeownership … they buy a starter home, they grow into a larger home, buy multiple homes and then eventually downsize. Each phase requires details on how to care for the home, how to improve the home and how to manage the finances of the home.
Using digital solutions to manage this information creates a central system where all the data about your home is in one place. This information gives the homeowner what they need to make the best decisions for their home to save money, improve value and be better organized.
What are the benefits of digital home management to homeowners?
Digital home management has a several benefits for homeowners. First, by documenting the details of a home’s contents and its fixed assets like equipment and appliances for a digital home inventory, the homeowner can make sure they are not under-insured with their insurance policy and be ready to get reimbursed via a claim if the house is damaged or destroyed. Tracking a home maintenance calendar will help homeowners keep a healthy, efficient and safe home, which lowers monthly utility bills and avoids expensive fix-it or replace-it bills. And carefully planning home repair, design and remodel projects can help keep homeowners on budget and prepared for tax time and for future resale marketing
Additionally, using a digital home management solution to track documents, contacts and photos of the home will create an efficient model to find all things home in one central location.
What are some of the most common areas homeowners struggle with when trying to manage their home finances?
Most homeowners lose track of all home-related expenses. They don’t realize that there are annual property, utility and basic home services bills. There are home remodel costs that can be both expenses but also investments in the home. Unexpected fix-it or replacement costs come as a big surprise. They either have multiple systems to track all this or worse yet, they have no system to track this. They track purchases here, they track maintenance tasks over there, mortgages and insurance are tracked in a different location than project expenses.
Consolidating all this information into one location helps homeowners understand the impact their homes have on their overall income and finances.
How can homeowners better track their home finances? Where should they begin to get better organized and stay on top of how they’re investing in their homes?
To get better organized about home finances, homeowners can start with reviewing their mortgage and determine what their remaining balance is and the mortgage pay-off date. In addition, it is important to get an estimate of the value of your house, and thus get an estimate of the amount of equity you have in the house. This helps with long-term planning and gives the homeowner options on whether to refinance or take a home equity loan.
The next step is to create a monthly budget of all your home-related expenses such as utility bills, property taxes, HOA fees, home services like pest control and security monitoring. Some bills are due once a year, others may be due quarterly so knowing how much you need to spend each month keeps you in better control.
Once you have a grasp on this data, move on to tracking home maintenance you regularly perform during the year. If there are costs to the tasks that are completed, then log them and gain an understanding of what recurring tasks you will pay next year. This gives any homeowner the ability to budget for next year’s home maintenance. Track your major home remodel expenses separately as this impacts the tax basis on your house which is important to know at tax time and in the future when you sell the house.
After you have understood monthly expenses and annual maintenance costs, now it is time to track the contents of you home. Create a home inventory to understand what you own. If you have receipts or appraisals, you can track the estimated values. If you do not have receipts, then do a little research to estimate what your value to replace the item would be. This can then be used to compared to what you are covered for on your insurance policy.
What financial metrics should homeowners track when it comes to their home?
The estimated value of the home, the remaining mortgage balance and thus the estimated home equity is a priority for the long run. Household expenses like utilities, the monthly mortgage details, insurance premiums and annual property taxes are important to track every year. Understand the age of your house and the home maintenance costs, remodel project costs, item content and home values are necessary to track in order to protect your investment as well.
What areas do you find homeowners spend too much time on?
It is a natural situation that consumers spend almost all their time on the day-to-day lifestyle aspects of their home because this, of course, is where the family and friends are most of the time. But homeowners need to allocate enough time to manage their home because it is their largest asset and biggest expense.
As an example, homeowners spend too much time on dreaming about a wish list for a remodel project, but not enough time running the numbers necessary to track and budget for projects. It is great to know all about the items you want in your home for your project, but tracking the financial implications will determine how you can actually execute on the projects.
Why is having an up-to-date, accurate home inventory important to having an overview of home finances?
Understanding what you own and the details of your home help in times of replacement. If you need to file a claim with your insurance provider than you have an accurate account of what you own with a home inventory. You can also meet with your insurance agent to make sure you have the proper coverage for your belongings. Depending on your insurance policy, some items may require special riders or extensions to the current policy.
Additionally, a home inventory helps in times of marriage, divorce, moving, estate planning and so many other areas that require an understanding of the items that you own. Having a home inventory can also help any homeowner understand what is in their home and the estimated values of those items.
What should a thorough home inventory consist of? What do you find homeowners tend to overlook when doing an inventory?
A thorough home inventory should consist of photos of rooms and items, the manufacturer of the items, and estimated values to replace the items. Any documents pertaining to the room or item like receipts, appraisals, owner’s manuals, warranty cards, contracts for work performed or other pieces that describe the item can also be helpful in managing the overall home inventory.
If you know specifics like sizes or location of purchase, these specifics can come in handy when knowing the details of what you own. They are not necessary but they do come in handy when you are trying to find similar pieces.
Many homeowners overlook the details of rooms and items. They forgot that knowing a room size can actually help determine if a sofa or a table will actually fit in the room. They also forget where they purchased items and may want like items and spend more time searching for matching items rather than buying what they need. Knowing what you own will also help prevent you from buying the exact same item and therefore wasting time and money.
What should more home owners be doing to better manage their mortgages and other home-related loans? What are some of your favorite tips and tricks?
Understanding how much is left on your mortgage and comparing that against the value of your house, will help every homeowner understand how much equity they have in their home for long-term planning. Homeowners also overlook opportunities to refinance. They may not realize they quality for a refinance and they may not understand what information they need to gather to determine if a refinance is for them.
A great tip is to periodically review your current mortgage situation and current interest rates. A homeowner may find that refinancing may be a great option to help with manage their overall finances.
What advice do you find yourself repeating to clients over and over? What should we all be doing differently when it comes to money management and our homes?
Some of the advice I see giving clients over and over, is that tracking all things home related in one place has more long-term value. I also find myself reminding clients that everything in the home has a financial value and that impacts your overall finances. Most people do not realize that our homes are one of, if not, the largest expense we have in our lives. So properly being aware of the details can go a long way.
When it comes to managing our homes, we have an opportunity to document as many details as possible. Better awareness of the details and the finances of our homes, helps us make the best decisions possible or our home and our family.
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