If you-re buying a home, don-t stretch too far to buy an expensive place. You should still have some cash left over.
* You should have an emergency fund of at least 1 percent of the purchase price for improvements and unexpected expenses. That-s $2,000 on a home you buy for $200,000, for instance. Of course, a 2 percent or 3 percent reserve would be better.
* Even larger reserves are necessary if you anticipate a major outlay soon. To get an idea of what costs are in your future, have the home inspected before you buy and read the report carefully. A furnace typically lasts for 12-15 years, for example. If you buy a home with a 10-year-old furnace, plan to replace it in two to five years. Apply a similar calculation to the home-s water heater, which probably will need to be replaced after 10 to 12 years.
