When you’re trying to buy a new home, it’s easy to get caught up in the details of down payments, mortgages, security deposits or lease agreements. But after you sign a lease or close on a mortgage, you’ve still got the hard work of moving into your new digs.
Getting into your home (and actually affording to live there) involves careful planning and strategic money moves. Here’s how to prepare financially for moving into a new home.
1. Create a moving budget and start saving
You need to have an idea of how much moving will cost. Ideally, you should start tallying up moving expenses several months ahead, which will give you the opportunity to save up a moving fund.
Create your budget
Create your budget by adding up anticipated moving expenses along with well-researched cost estimates. Expenses may include van rentals, hiring movers, gas, food and, if you’re moving a great distance, lodging. Be sure to include costs associated with vacating your current home, such as making repairs or renting a storage unit.
“There are obvious moving costs like renting a truck, hiring movers and travel. However, the easily forgotten costs, like packing materials and real estate agent fees, should not be forgotten,” said Sahil Vakil, founder and CEO at MYRA Wealth.
Don’t forget the things you’ll need for your home as soon as you move in, including furniture, groceries and appliances. Remember, you don’t need to fill your home up all at once. Some things, like additional furniture, art and kitchen gadgets can be acquired over time.
Look for opportunities to cut costs. You could enlist the help of friends (and spring for pizza and beer) instead of hiring movers, borrow someone’s truck instead of renting a van, or purchase furniture secondhand instead of buying it off the showroom floor.
Once you have a budget, you should start saving with the intent of meeting your goal by the time you move. It may help to have a separate savings account specifically for moving purposes (it will also help to add a little cushion for unexpected costs).
Vakil recommends having a separate line item in your monthly budget for setting aside cash for moving. Being able to pay for your moving expenses with cash can help avoid going into debt, he said.
2. Get rid of your unwanted stuff
Getting rid of unwanted stuff can make moving easier, as you’ll have less cargo to haul to your new home. But if you play your cards right, you can squeeze money out of used items as well.
Old clothing, furniture, electronics, appliances and more can be sold or donated before you move. You can unload unwanted valuables and furniture for cash via sites like Facebook Marketplace or Craigslist, sell your clothes via physical consignment stores or online marketplaces like Thredup and Poshmark, or go old school and have a yard sale.
Local charities may accept donations of gently used items including clothing and furniture. Some may even come to your house to haul away your unwanted stuff. You can write these donations off on your taxes if you are eligible to itemize your deductions.
3. See if your employer will cover moving expenses
Are you moving for your current employer or starting a job with a new employer? Check to see if your employer will cover some or all of your moving expenses. Employer relocation packages can take many forms:
A lump-sum relocation package can be used to pay for moving costs, but any moving expenses that exceed the payout will have to come out of your pocket.
Dollar-for-dollar reimbursement packages can cover packing and moving expenses, short-term storage unit rentals, meals and travel costs and more. Make sure to understand what is covered, and save your receipts.
Third-party contractors may be hired by your employer to coordinate moving logistics.
The more valuable you are to your employer, the more likely they are to cover your moving expenses. Some employers have standard relocation package policies, while others may require negotiating.
“While your employer may reimburse many relocation costs for you, check into the fine print to see what's actually included. If it's a long trip across the country, they may not include hotel stays and food costs along the way,” said Vakil.
Any relocation benefits you receive are considered taxable income and must be declared in your wages. Members of the military can still exclude reimbursements for qualified moving expenses from their income if they are on active duty, moving in accordance with military orders and if the expense would qualify as a deduction if the service member didn’t receive a reimbursement.
4. Create a budget for living in your new home
If you don’t already have a monthly budget to track your income and expenses, now is a good time to create one. You can use our simple spreadsheet to create a budget. Make sure to account for rent or mortgage payments, bills and utilities, groceries, savings and other necessities.
If you already have a monthly budget, you should adjust it to account for your new reality. Updating your rent or mortgage payment is obvious, but your bills may also change based on the size of your home, whether you’re signing up for a different internet or cable package, if you will be using well water or city water and other factors.
Don’t forget the hidden costs of your new home such as homeowners association fees and insurance or property taxes, which can increase every year.
5. Increase your emergency fund
Emergency savings funds can act as safety nets that prevent financial hardship. They can help you get through times of financial struggle like losing your job and help you afford unexpected financial burdens, like car repairs or replacing a home appliance.
You should be saving up several months’ worth of expenses in your emergency fund, which can help you prepare for unexpected costs of moving into your new home. Even if that seems impossible, you should set some funds aside.
Moving is a valid reason to dip into an existing emergency savings fund, but you should work on beefing up your savings ahead of the move to avoid depleting it.
6. Work out a financial agreement with roommates
Living with roommates? Every tenant should understand their financial obligations. Putting an agreement in place can help you afford your home and avoid disputes. Leases typically don’t outline how to split expenses with roommates, so it’s a good idea to have a written agreement, even if it isn’t a formal legal contract.
If you’re the primary homeowner or resident, you may simply ask your roommates to reimburse you for their fair share of rent and utilities once a month. Alternatively, it might make sense to put certain bills in your name and certain bills in the names of your roommates.
7. Get insurance
You need to protect yourself and your property with insurance. The type you need depends on whether you’re renting or buying your home.
Whether you rent a room, an apartment or an entire house, renters insurance is a good idea. It can cover property damage and losses resulting from a burglary, medical costs due to an accident incurred by a guest in your home and even the costs of food or lodging if your home becomes unlivable due to certain types of damage. Some landlords require their tenants to have renters insurance.
Homeowners aren’t legally required to get homeowners insurance, but your mortgage lender may require you to get some level of coverage. Homeowners insurance covers your home and belongings if they are damaged, destroyed or lost due to burglary or natural disasters and can protect you against certain legal liabilities as well (some types of disasters, such as floods, may require separate insurance policies).
Even if you pay for your home with cash up front, homeowners insurance will protect you from future financial disasters.
Here are some tips for selling your old stuff.
DaveRamsey.com provides some advice on negotiating a relocation package with your employer.
Here’s what to look for in an emergency savings account.
Forbes advises how roommates can divvy up expenses effectively.
Here’s how renters insurance works.
Here’s what homeowners insurance covers.
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