Designing, utilizing and implementing a budget, no matter what you are spending your money on, can help keep things straight. Especially when you are doing a home renovation or remodeling project. Knowing how much money you have versus what you hoped you’d have, can make all the difference. Staying within the budget is the goal and having that number upfront can save you a lot of surprises down the road.
Setting priorities, establishing your spending limit and sticking to your budget are all ways you can ensure success with a home renovation project! Here are a couple of tips to get you started with creating your renovation budget.
SET YOUR GOALS
Figure out what your end goals are for the project. Make short-term and long-term goals and keep things realistic. Consider the condition of your home while you are setting your goals to make sure your renovations are relevant and doable. Know the size of your desired renovation, because pricing for these kinds of projects are typically calculated by square foot measuring. You will want to create a renovation budget spreadsheet where you can keep track of estimated costs vs. actual costs of each phase of the project.
CONSIDER YOUR FINANCING OPTIONS
Decide if you plan to use savings or borrow money for the renovation. Know how much you can afford and consider the financing options available to you. Some people choose to save until they can pay for the project upfront. Other people don’t have the capital saved for upfront costs, so they consider financing borrowed money for the project. Most banking institutions have numerous options for these kinds of home projects, like a home-equity loan, or a secured line of credit or you can even look into adding it to your mortgage to get the best interest rate available.
If you decide to borrow money, remember the interest needs to be included in the total and included in your budget. We suggest meeting with a banker, financial consultant and/or a general contractor to help you design your budget. They have experience with these kinds of projects and can advise you on costs, processes and what to expect if this is your very first renovation.
WHAT ABOUT RESALE VALUE?
Have a good idea of how long you plan to remain in your home, prior to pulling the trigger on the home renovation. Know what your home is worth and what the return on investment would bring if you sold the home. Some home improvements can add to the value of your home, so do some research on homes with similar floor plans, costs of similar remodeling projects for other homes and then the resale value after the projects were done. It’s always a great idea to get as educated as possible before you start a costly renovation.
GET A QUOTE
Typically, contractors will usually give you a free, rough estimate or quote of a remodel. If you want a more detailed quote, some contractors will charge you a fee for what they call a “hard quote.” The hard quote will have detailed line items spelling out the project’s cost, material costs, labor costs, etc. Time and materials need to be included in the budget and those are two things newbies forget to include when creating a budget. Once you have a hard quote, you are better able to line out which smaller parts of the renovation you might be able to help with, to save costs. There are always little things home owners can do to cut costs, it’s just figuring out what those things might be.
BUDGET FOR THE UNFORESEEN EXPENSES
Unforeseen expenses are annoying and have the potential to throw a wrench in the process. From the start, it’s important to plan for these kinds of expenses because often, you’ll see them pop up during a home renovation project and it’s a real bummer if you aren’t prepared for them. The general rule of thumb is to add an additional 15-20% of the overall cash budget, for unforeseen expenses. Once the project is complete, if you haven’t had any surprises, you’ll have a little nest egg you can use for new furniture or to pay towards the financed money.
BE WILLING TO CUT COSTS ALONG THE WAY
No one wants to do a home renovation and go about it with cheap materials, cutting costs and sacrificing the overall result simply to save money. That is why is so important to create your budget with realistic goals, realistic financing options and an unforeseen cushion. There is nothing wrong with trying to save here and there. Most contractors will give you options and as they get to know you, they will understand where they can help you cut costs and where you won’t budge on the expensive options.
Consider refurbishing items instead of throwing them out and buying brand new ones. You could also settle on lower cost finishings, without giving up aesthetic, by researching all the options and having probing conversations with the experts. Offer to help with some of the labor. That can reduce time your contractor bills, for things like jobsite clean-ups and ripping out carpets, etc.
And finally, do your best to refrain from adding additional things throughout the project. Often people get caught up in the project, and they discover bigger and better options as they become educated about things they knew nothing about prior to the renovation. You might have your heart set on one kind of tile, and it’s within your budget, but then you go to the tile store and you start to daydream about some beautiful tile from Italy that would be perfect~ and suddenly you have doubled your tile costs. This happens, so it’s important to keep things in check and know your limits.