Budgeting for Basic Housing Expenses

In my 20 years of active duty, my wife and I rented six times, lived in four base houses and bought three houses of our own. To make those houses into "homes" for our family, we had to buy new curtains for seven places, build three fences for our dog, purchase transformers for overseas electrical outlets and buy a variety of lawn tools when we moved into our first house with a yard.

It often surprised me how much we spent for each new place.

For many service members and their families, housing is their largest spending category, with the average American household spending $21,409 in 2020, according to the Bureau of Labor Statistics. A significant portion of this is maintenance and repairs. Combined with furnishings and décor, the expenses can add up quickly — whether you rent, own or live in privatized base housing.

So, where should you start when reviewing your options and budgeting for monthly housing costs?

Your Basic Allowance for Housing, which is based on your rank and median housing costs in your specific area, can provide a good starting point. Just remember: Any housing-related costs beyond your BAH, to include utilities, will come out of your pocket.

Let's take a look at some of the common costs associated with each housing option.

If You Rent ...

You'll typically pay a monthly rent payment, renters insurance and possibly utilities, as well as any other costs you may be responsible for under your agreement, such as lawn care, pest control, gutter cleaning and snow removal. If you have pets, you may have to pay an additional deposit or fee. Review your lease agreement closely to ensure you know what is and isn't included.

If You Are Buying a Home ...

You'll likely pay a mortgage each month plus property tax, insurance and utilities, as well as the cost of any potential renovations, repairs and routine maintenance. Depending on where you live, you may also be subject to a homeowners association or condominium fee. If you put down less than 20% on your home with a traditional loan, you may have to factor in private mortgage insurance. Note that VA-backed loans do not require mortgage insurance, but the VA does charge a funding fee.

Maintenance and repair costs can add up quickly. Over the last decade, I've spent an average of $4,067 per year for maintenance and repairs on my home. Many of those were substantial one-time costs, like re-roofing, tree removal and furnace replacement. When possible, try to prepare for these unexpected costs by setting money aside in a specific "home repairs fund" or allocating a portion of your emergency fund.

If you plan to sell your house before your next PCS, you may also need to consider the cost to sell. This could include spending money to get your home ready to go on the market, realtor fees — which generally cost 5% to 6% of the home value — and potential buyer contingencies.

If You Live in Privatized Base Housing ...

Your BAH will go directly to the housing management company, which covers all resident matters, including maintenance and potentially utilities. However, you are responsible for other expenses your BAH may not cover — such as additional utilities, possible lawn care costs or renters insurance, which is typically required in privatized base housing.

Prepare for the Not-so-Obvious Costs

As illustrated by my seven different types of curtain rods, changes in your living situation often drive the need for additional purchases. Each residence is unique, and so are the costs for making it work well for your family. A new fireplace may require fireplace tools and chimney cleaning, while a new yard may require purchasing yard tools or hiring a lawn service.

Each move can also come with its share of unexpected expenses, like temporary lodging, final utility payments, transfer fees, cleaning costs or paying to move items not covered by the military. While you may not be able to plan for every surprise, these resources can help.

Knowing how housing costs will affect your finances is important — housing calculators and budgeting tools can help you crunch the numbers. After you look at your income and expenses, you can decide how to prioritize where to spend and where to save.

For more information on housing in your area, visit your installation's military housing office. You can also make a no-cost appointment with a personal financial manager and counselor at your nearest Military and Family Support Center.

As you reach new milestones and complete your service's financial readiness training, look to the Office of Financial Readiness and your service for additional resources. You can also follow @DoDFINRED on Facebook, Twitter, Instagram and YouTube — and download our mobile app, Sen$e, for financial tips on the go! Find it in the Google Play and iOS app stores.

Justin W. Hall is Strategic Communications Manager, Financial Readiness, in the Office of the Deputy Assistant Secretary of Defense for Force Education and Training. He served as an Air Force officer for 20 years.