It's no secret that owning a home takes money. First, you need to come up with a down payment. Then, you need to pay your closing costs. And once you live in that home, you need to cover things like property taxes, insurance, maintenance, and repairs.
But there's another major expense you need to account for when becoming a homeowner, and it's filling that space with furniture. Yet 19% of U.S. adults who own homes carry furniture-related debt, reports Improvenet, and among them, the average level of debt in this category stands at $1,350.
On the one hand, that may not seem like such a huge number (it's actually not in the grand scheme of furnishing what could easily be 2,000 square feet of living space or more). But what that number does tell us is that buyers ought to be more careful when planning for the peripheral costs of homeownership.
Can you really afford more debt?
The problem with owing money for home-related expenses, whether it's furniture, improvements, or repairs, is that you'll be on the hook for yet another monthly debt payment. And when you add that cost to what you pay for your mortgage, it can quickly begin to monopolize an unhealthy percentage of your income.
As a general rule, your predictable homeownership costs should not exceed 30% of your take-home pay. These include your mortgage payment, property tax bill, and homeowners insurance. Some financial experts advise lobbing regular maintenance (though not repairs, since those are less foreseeable) into that 30% estimate as well to ensure that you're keeping your overall housing costs to a reasonable level, thereby leaving yourself with ample wiggle room in your budget. But once you begin to take on more debt related to owning your home, your monthly obligations can climb above that 30% threshold, thereby putting you in jeopardy during periods when you need to spend more on other things (say, your car needs costly maintenance, or you're hit with a string of medical bills).
The takeaway? When you're in the process of planning to buy a home, factor the cost of furnishing that space into your budget. That way, you don't wind up with extra debt that not only costs you money in interest, but potentially messes with your credit score and also wreaks havoc on your budget.
That said, try to avoid buying furniture until you’ve closed on your mortgage. If you withdraw a large sum of money from your savings account before finalizing that loan, or take on more debt by financing furniture, it could put your mortgage at risk.
Furnishing a larger home
Some people incur furniture-related debt when they take on more square footage than they’re used to. But if you're buying a larger home, there's no need to furnish all of it at once.
Imagine you and your spouse are closing on a new home, and it's just the two of you. You might, for example, start by making sure you have bedroom furniture for yourselves, a kitchen table and chairs, and a living room couch. From there, you can stagger your purchases as follows:
- Eat at your kitchen table and wait on a dining room set, especially if you want a higher-end one
- Ignore your family room if you have a living room, and buy that second couch down the line
- Buy a cheap futon for your guest bedroom and fully furnish it later on; or go ultra-cheap and stick to an air mattress
- Purchase low-cost snack tables to stick on the side of your living room couch, and buy actual end tables when you have the money
- Keep bedrooms earmarked for children furniture-free until you’re actually looking at a kicking image on an ultrasound
Remember, you never know when you might get a raise at work, or land an impressive commission or bonus that gives you access to a pile of cash. And that's the perfect time to invest in furniture -- when you can afford to pay for it on the spot.
Another thing: You never know when you might find quality used furniture online, at yard sales, or at consignment shops, so don’t assume you have to pay a premium to buy new. A few second-hand pieces might work nicely in your home at a fraction of the cost of what brand-new ones will run you. And that’s another good way to stay out of debt -- and avoid wrecking your finances needlessly.