5 Financial Mistakes New Homeowners Make (And How to Avoid Them)

February 15, 2026 · LifeStarter Team

You survived the mortgage process, the inspection, the closing costs, and the move. Your bank account is looking a little thin, but you’re a homeowner now. Time to celebrate, right?

Yes — but also time to be careful. The first year of homeownership is when most people make their costliest financial mistakes. We’ve seen it happen over and over, and most of these mistakes are completely avoidable.

Here are the five biggest ones, and exactly how to sidestep them.

1. Not Building a Maintenance Fund

The mistake: Assuming your mortgage payment is your only housing cost.

The reality: Homes cost money to maintain — a lot of money. The standard rule of thumb is 1-2% of your home’s value per year. For a $350,000 home, that’s $3,500-7,000 annually.

And that’s just routine maintenance. It doesn’t cover surprises like a failed water heater ($1,200-2,500), a roof repair ($500-5,000), or an HVAC replacement ($5,000-15,000).

How to avoid it: Open a separate high-yield savings account on day one. Set up an automatic monthly transfer of at least 1% of your home’s value divided by 12. For a $350,000 home, that’s about $290/month. Don’t touch this money unless it’s for the house.

2. Furnishing the Entire House at Once

The mistake: Buying all new furniture, decor, and appliances in the first month — usually on credit.

The reality: After a down payment and closing costs, the worst thing you can do is pile on more debt. Yet the average new homeowner spends $10,000-15,000 on furniture and home goods in their first year, and much of it goes on credit cards at 20%+ interest.

How to avoid it: Live with what you have for at least 3-6 months. You’ll learn what you actually need versus what you think you need. Buy essentials first (bed, basic kitchen items, shower curtain). Everything else can wait.

When you do buy, prioritize quality for items you use daily (mattress, couch) and go budget for everything else. Check Facebook Marketplace, estate sales, and Habitat for Humanity ReStores for incredible deals on quality furniture.

3. Ignoring Preventive Maintenance

The mistake: Skipping “optional” maintenance tasks because the house seems fine.

The reality: Preventive maintenance isn’t optional — it’s the cheapest insurance policy you’ll ever have. A $20 furnace filter replaced quarterly prevents a $5,000 HVAC repair. A $150 annual gutter cleaning prevents $10,000 in foundation damage.

Here’s what deferred maintenance actually costs:

Skipped Task Cost to Skip Cost When It Fails
Furnace filter ($20/quarter) $80/year $3,000-7,000 HVAC replacement
Gutter cleaning ($150/year) $150/year $5,000-15,000 foundation repair
Dryer vent cleaning ($100/year) $100/year House fire
Water heater flush ($0 DIY) Free $1,500-3,000 early replacement

How to avoid it: Set up a maintenance calendar and treat it like bill payments — non-negotiable. Our New Homeowner Starter Kit includes a complete seasonal maintenance schedule so nothing falls through the cracks.

4. Underinsuring Your Home

The mistake: Choosing the cheapest homeowner’s insurance without understanding what’s covered.

The reality: Standard homeowner’s insurance doesn’t cover floods, earthquakes, sewer backups, or many other common disasters. And many policies have coverage limits that won’t actually replace your belongings.

The most dangerous gap: flood insurance. FEMA estimates that just one inch of floodwater causes $25,000 in damage. And you don’t have to be in a flood zone — over 20% of flood insurance claims come from low-to-moderate risk areas.

How to avoid it:

  • Review your policy thoroughly. Understand your dwelling coverage, personal property limits, liability coverage, and deductible.
  • Get replacement cost coverage, not actual cash value. The difference: if your 5-year-old TV breaks, replacement cost pays for a new TV. Actual cash value pays for a depreciated 5-year-old TV — which is almost nothing.
  • Consider flood insurance even if you’re not required to have it. Policies through FEMA’s NFIP start around $400/year.
  • Create a home inventory with photos and estimated values. Store it in the cloud so it survives a disaster. (Our Starter Kit includes a home inventory template.)

5. Making Renovations Before Living In the Space

The mistake: Tearing out the kitchen / bathroom / floors before you’ve spent a single winter in the house.

The reality: You don’t know what you actually want to change until you’ve lived there. That wall you want to knock down? It might be the only thing blocking noise from the street. The bathroom layout you hate? You might realize it’s actually functional once you’ve used it for a few months.

Worse, renovation costs almost always exceed estimates. The average kitchen remodel costs $25,000-75,000, and most homeowners go 10-20% over budget. If you haven’t built up financial reserves yet, this can be devastating.

How to avoid it: Make a “wish list, not a to-do list” rule for your first year. Write down everything you want to change, but don’t act on anything non-essential for at least 6 months. You’ll be surprised how many items fall off the list.

When you do renovate, get at least 3 quotes, add 20% to the highest one for your real budget, and never finance renovations on credit cards.

The Bottom Line

Homeownership is one of the best financial decisions you can make — but only if you manage it wisely. The first year sets the tone for everything that follows.

The common thread in all five mistakes? Lack of planning. A little preparation in your first month saves thousands of dollars over the life of your home.

Want a complete financial framework for your first year? The New Homeowner Starter Kit includes budget templates, maintenance calendars, insurance checklists, and more — everything you need to start smart.

🌱 Want to save on landscaping costs? Lush Lawns teaches you DIY lawn care by region — no expensive lawn service needed. And MowGuide has honest reviews of the tools that actually matter.

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