How to Set a Home Renovation Budget

 

It’s a truism that renovations are always delayed and over budget. In fact, homeowners may be more anxious about the budgeting aspect of a renovation than they are about living through the construction itself. Despite the inherent unpredictability of any type of construction, it’s possible to learn how to set a home renovation budget that will protect your savings account.


Practice Frugality

While there’s nothing wrong with splurging on a few items during your renovation, it’s unwise to choose the very best you can afford in every category. Stretching a budget too thin by packing in too many splurges is, in fact, the most common reason that remodeling efforts are shelved before they’re completed.


Include 20% for Overages

It’s important to note that this is the renovation budget advice that is most often ignored, yet it has the potential to prevent most of the financial stress that results from remodeling. Many homeowners think they have planned carefully enough to skip this step, but almost no one is so fortunate.

Your final budget should be as accurate as possible, with the understanding that it will very likely still be too low. A safe padding for your project’s budget is 20%, but that only applies once you’ve checked each box on the following guide.


Embrace Spreadsheets

A room-by-room spreadsheet will allow you to keep track of each stage of remodeling. Create a spreadsheet with at least three columns: Budget, Projection, and Actual.

Your budget will be the result of careful calculations for the materials you’ll need in each room. While your contractor’s fees may include a few materials, they are unlikely to include fixtures and finishes, which is the industry term for everything else, ranging from cabinetry to appliances.

Your projection will be flexible. Update this figure when a price comes back higher or lower than anticipated.

Record your actual numbers as construction progresses. Once materials have been ordered and installed, you’ll have final, accurate totals.

This type of dynamic spreadsheet system will allow you to create a cohesive budget, revise it in real-time without getting sidetracked, and track cash as you spend it.

This system can also be used to keep track of your contractor, architect, and interior designer, allowing you to flip between budgets and consider each in context alongside the others.


Plan for Shipping Fees and Sales Tax

If you’re used to shopping online, you have probably come to expect free or low-cost shipping. Unfortunately, the big-ticket purchases you’ll be making for your renovation will have hefty shipping and delivery fees to cover.

Tile, flooring, cabinetry, and appliances are all subject to delivery charges ranging from $100 to $600. Doing your research on shipping and delivery fees ahead of time is a vital step in creating an accurate budget.

Similarly, you’ll want to keep track of sales tax projections. If you create a spreadsheet column that calculates 10% in tax, you won’t have to face several hundreds of dollars in unexpected fees down the line and you might even have a tiny bit leftover.


Consider the True Cost of Finishing Touches

While unique spaces with creative finishes are beautiful and exciting in photographs, they are almost always more expensive to create. Additionally, you can expect to wait at least ten weeks on any custom supplies like tile, doors, cabinet fronts, and shower components.

While it’s annoying to have to return supplies you don’t use, homeowners sometimes do not realize that when you choose custom materials, you may not even have this option! Assume that any custom item you order must be used because you’re going to be responsible for at least a heavy fee if you must exchange and reorder these custom pieces.


Plan for Setbacks

Custom components increase the risk of delays, but even a straightforward renovation can run into problems. To be safe—and avoid paying double mortgages or outrageous hotel costs—pad your time projection with two months to obtain permits and plan as well as 30% (of the total projected time) for delays in construction.

If you’ll need accommodations during the project, assume you’ll need them for this additional timeframe as well. If your project moves along unusually quickly, any extra money can be reinvested or even used to purchase additional upgrades or furniture for your home.


Establish and Communicate Clear Financial Limits

If your designer or architect is fuzzy about your true budget, they may opt for more expensive, discretionary upgrades in order to realize their ideal version of the design. If, on the other hand, you are very clear about the exact amount you’re willing to spend, they will be able to create a well-balanced design that stays within your aesthetic and financial parameters.


Reduce Delays by Visiting Often

Unless you’re living in your home while it’s remodeled, you’ll want to stop by regularly to catch any mistakes or miscommunications shortly after they occur. While a contractor will fix a mistake, you’re not likely to be refunded for any costs you incur due to the resulting delay.

Furthermore, even if you are able to include a clause requiring the contractor to cover the cost of delays, they won’t be required to pay for small lags here and there. If your renovation spans many months, repeated lag times can become costly.


Resist the Urge to Change Your Plans

While a Pinterest rabbit hole can be a great experience when you’re planning your renovation, it’s a good idea to move beyond the creative phase once you’ve set your budget and begun work. Unless they are very minor adjustments, any changes you instigate at this stage are unlikely to be worth the additional cost, not to mention the hassle for everyone involved.

Whether your renovation efforts are intended to prepare your home for your family to enjoy or to snag an advantageous offer, you must lend your full attention to the planning and budgeting stages. Taking this proactive first step is crucial in making the overall remodeling process as smooth as possible.


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