Saving
Moving home concentrates a year of costs into a few weeks
The money involved in changing address arrives as a dense cluster of separate payments, most of them due before the new place has been lived in for a single day.
By Rosa Iglesias4 min read
The problem is the density, not the total
A household that changes address pays for a long list of things, and the individual items are mostly unremarkable. What makes moving financially difficult is that nearly all of them fall due inside the same short window, and several of them have to be paid before any money comes back from the place being left behind.
That is a cash-flow problem rather than an affordability one, and the two are frequently confused. A household can be perfectly able to afford a move over the course of a year and still be unable to meet it in the fortnight when the payments actually land.
The consequence of getting that wrong tends to be short-term borrowing at exactly the moment when attention is elsewhere, which is an expensive combination. Knowing the shape of the cluster in advance is most of the work, and the shape is broadly the same everywhere even though the individual amounts are not.
Most of the money leaves before the keys arrive
Whatever the local arrangements, moving generally involves paying a deposit or something equivalent, paying the professionals involved in the transaction, paying for the physical move itself, and paying whatever is required to secure the new place. These sit at the front of the sequence.
Money coming the other way — a deposit returned, a bond released, proceeds from a sale — usually arrives later, sometimes considerably later, and sometimes less than expected. Any plan that relies on the returning money to fund the departing money has a timing assumption inside it, and it is the assumption most likely to fail.
Overlap is the other reliable expense. Paying for two places for a period is common, whether that is a fortnight of double rent or the interval between committing to one home and disposing of another, and it deserves an explicit line rather than an optimistic shrug.
The setting-up costs are the ones nobody budgets for
The costs that surprise people are almost never the large obvious ones. They are the accumulation of small necessities that follow moving into an unfamiliar space: curtains that do not fit, a different set of connections, cleaning, minor repairs, the things left behind and the things that did not survive the van.
None of these is individually large and there are a great many of them. A household that has budgeted precisely for the transaction and nothing for the settling-in period usually finds the first two months after the move more uncomfortable than the move itself.
A reasonable approach is to put a deliberate figure against this category, accept that it is a guess, and treat it as a range rather than a number. It is better to have an approximate line than an absent one. Households that have moved before can usually improve the guess considerably by remembering what caught them out last time, which is the cheapest research available.
The running costs change too, and not always in the direction expected
A move resets almost every recurring household cost at once. The size of the place, its condition, the local charges that apply, the distance to everywhere you regularly go — all of these change together, and the new total is rarely the old one plus the difference in rent or repayment.
The comparison worth making is therefore between two full monthly totals rather than between two headline housing figures. A cheaper home that is further from everything can cost more to live in, and a dearer one that is smaller and better maintained can cost less.
Because the change happens all at once, it takes several months before the new normal is visible in a bank statement. Until then, any budget for the new address is a forecast, and it is sensible to hold a little more cash than usual while the forecast is being tested against reality.
What a moving fund actually needs to hold
Two separate amounts are involved. One is the sum of the payments expected, which can be listed and totalled with reasonable accuracy once the local arrangements are known. The other is a buffer against the timing, which exists because a return is delayed or a completion slips, and it needs to be in a form that can be reached quickly.
The second amount is the one households leave out. It has nothing to do with underestimating the cost of moving and everything to do with the fact that dates in a property transaction move, and moving dates cost money to accommodate.
Costs, taxes and charges attached to moving differ enormously between countries and change from year to year, so the only reliable list is a local one obtained close to the time. Where the sums are substantial — and in a move they usually are — the professionals involved and a regulated adviser are better sources than any general account, including this one.
Common questions
How far ahead should a moving fund be started?
Far enough that the cluster of payments is met from savings rather than credit, which for most households means months rather than weeks. The useful trigger is the point at which a move becomes likely rather than the point at which it becomes certain, because the first payments often fall due very soon after that.
Why does money returned from a previous home cause so many problems?
Because it arrives after the new payments are due, and because the amount is not settled until it is inspected, calculated or agreed. Treating it as a certainty on a particular date is what produces the shortfall; treating it as a repayment to the fund afterwards avoids it.
What is usually underestimated most?
The settling-in spending in the weeks after the move, and the overlap period where two homes are being paid for at once. Neither is dramatic on its own, and both are routinely left out of a budget that covers the transaction precisely.
Rosa has written about spending, saving, debt for most of the last decade and is unreasonably interested in the detail nobody else checks.
