Two 2 Per Cents

The problem with giving your 2 cents is 2 cents isn’t worth a lot of money.  Ben Franklin said a penny saved is a penny earned, but Ben didn’t count for inflation.

However, Dr. Franklin was on to something regarding savings, and it doesn’t take a rocket scientist (Franklin was a scientist) to understand the rule of 2% on home savings.

My dad used to talk about how it cost him something like $27,500 to build his first home in Highland Park Illinois when I was just four years of age. Everyone always says wow with envy when they hear the low numbers of yesteryear. But they forget inflation and how much money it takes to keep up with a house.

We’ve lived in the same home since 2002.  The selling value is at least three times what we bought it for but consider the cost. We’ve had four AC replacements, two water heater changes, roof replacement, hurricane windows installed, gutters connected, remodeled an entire kitchen-bathrooms, painted the entire outside and inside (several times), switched out 90% of the floors, pressure cleaned a million times, had vents cleaned, sprinkler heads fixed, bought a generator, planted flowers fifty times, and redid the entire pool  plus cleaned it 23 years x 52 weeks = 1,196 cleanings. All of this while paying the mortgage.

So, what are my 2 cents of advice for homeowners on savings and what advice you should give to first time homeowners…..

2% + 2% Homeowner Savings Guideline

1. Set aside 2% of the cost of the house each year for repairs and replacement. The roof cost us $32,000 at the time. If it lasts 20 years, that alone should be $1600 a year in an account so these items don’t sneak up on you. I’ve seen homeowners need to sell because they didn’t plan well and the costs to fix big ticket items happened all at once.

2. Set aside another 2% for style changes. At one time the great popcorn ceiling salesperson, Artex, sold the hippest product around. Until it wasn’t. Baltic brown granite suffered the same fate as did small ceramic tile floors, the Boca Look, the Mediterranean craze, choppy floor plans, low ceilings, intercoms, central vac, laundry chutes, trash compacters, foil wallpaper, wet bars, wood paneled walls, floor outlets, built in wall units, and so on. Even today, bookshelves are dying out. Sure, they look good in the den and are great for the next pandemic Zoom Room Rater but younger people on average listen to books on Audible. Bottom line, in 15 years your new kitchen becomes an old kitchen and if you don’t have the money to replace it, then how much you can fetch for your home goes down with it.

Henry Ford had a history lesson of two sides of the same coin. “Whether you think you can or think you can’t, you’re right. Ford also thought only 2% of the people think; 3% think they think, and 95% would rather die than think.  Hopefully 2% of you will take my 2 cents!

The 2% + 2% put aside is forced savings. No different than a college savings account. Plus, it earns interest. It can always be used for a rainy-day fund, health issues, or the next down payment on a new house. But the future costs of a home are real and if you keep a separate savings account, it won’t be stressful when the money is owed. If you do take my advice and it works out, don’t worry about thanking me twice. Consider the advice a twofer.

Jeff Lichtenstein, originally from Chicago, got his start in the home furnishings textile business where he traveled over 35 weeks a year selling fabrics. After the family business was sold, Jeff moved to Florida and became a real estate agent. Today he is the owner and broker of Echo Fine Properties, a luxury residential brokerage voted best brokerage of the year. Jeff manages a non-traditional model of real estate that mimics a traditional business model. Echo has 80 agents, an average of one million dollars per transaction and over 500 million in annual sales. Between traveling for work and annual family trips to national parks with his wife and 2 now adult children, Jeff has visited 49 states. He is also one of the few Chicago White Sox fans you’ll ever meet.  Some publications he has been quoted in.

Author of business & leadership book How Making a Sandwich Can Change Your World –  The Amazing Success of the PB&J Strategy – Available to Buy Now!

Feel free to ask him a question directly at jeff@EchoFineProperties.com including a complementary  valuation of your home.

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