Planning a home renovation without going over budget means setting a realistic spending limit before work begins, building in a buffer for surprises, and tracking every expense as the project moves forward. It involves getting multiple estimates, the difference between a need and a want, and fixed and variable costs. A renovation budget that is well planned includes materials, labor, permits and 10-20% contingency. In such a way, homeowners can avoid having to regret their decision as it would cost them money.
Start With a Clear Scope Before You Talk Numbers
Before you think in terms of dollars, bite off anything specific in your mouth. Do you need to renovate one bathroom or are you doing the whole first floor? If you have a vague plan, you’ll have a vague budget, and vague budgets tend to quickly turn into massive ones.
Take a seat and write down what the project entails. Walk through each room, looking for telltale signs of mold. Notice the things that remain and the things that leave. This is a bit of a chore, but will help you avoid the “one more thing” syndrome that happens in the middle of a renovation when you didn’t set the limits!
A well-defined scope also ensures accurate quotes later on. It’s impossible to estimate the cost of a job if you can’t visualize it.
Set a Realistic Budget (and Pad It)
If you know exactly what you’re putting up for renovation, find out how much it usually costs to do the same kind of renovation in your area. The price will differ significantly from one area to another and will offer little national information. Look at sites of local contractors, solicit input from neighbors who have had similar projects done, or look at city-specific renovation forums.
That’s the part people don’t do: establish a contingency fund. The general rule of thumb for the industry is to reserve:
- 10% for a basic cosmetic change.
- 15% for an average renovation with several rooms
- 20% for all plumbing, electrical or structure modification work.
This isn’t pessimism. It’s realism. A house from the past conceals issues behind the walls. Allow longer than usual for permits. Materials are placed on back order. By adding these bumps to your budget from the start, you don’t end up with the whole project falling apart.
Get Multiple Quotes and Actually Compare Them
Never accept the first estimate that comes along that seems to be “okay”. Always get a minimum of 3 quotes for large projects. This will help you get an idea of the market rate and help you identify values that are too low or too high.
When comparing quotes, don’t be misled by the bottom line numbers. Check what’s included. Some contractors may include cleanup and disposal costs, others do not. Have each one compare labor versus materials, making sure that you’re comparing apples to apples.
It’s also a good idea to inquire about the payment schedule. If a contractor insists on a big deposit before he begins the project, that’s a warning sign to look into.
Prioritize Needs Over Wants
Any renovation list can be divided into two sections: those things that must be done and those that would be good to have. The quickest way to overspend is to intermingle these.
Discuss structural and functional problems first. Trendy backsplash doesn’t matter as much as a leaky roof or an old electrical system! After the basics are taken care of, allocate the remainder of your budget to luxury features that will enhance comfort or style.
Helps to categorize your list into two columns: must and would like. If you find yourself short on cash in the middle of the project, you will know what is essential and which things can be delayed.
Track Every Expense as You Go
If you don’t follow a budget, then it doesn’t work. Make a basic spreadsheet or use an app to record each purchase or payment. Don’t forget the little things. People usually don’t realize how fast it accumulates when they have to keep going to the hardware store for more screws and paint trays.
At the end of the renovation, you should not be the first one to look at your spending.The last person to look at your spending should be you during the renovation. It is not too late to catch up if the budget is broken in week two. Learning this in week 8, when you’ve already made a decision, is a much more challenging problem to solve.
If you see your expenditures beginning to grow in one area, then find a way to cut it in another. Perhaps you settle for an alternative type of tile or wait until after the overarching project is finished before tackling the second one.
Know When to DIY and When to Hire a Pro
There’s time to do some of the work yourself and save real money, but not all the time. A homeowner who is motivated can typically handle painting, basic demolition and simple landscaping. Hire a licensed plumber, electrician or structural contractor for plumbing, electrical or structural work.
It’s more expensive to get this right than to get it wrong. If it’s a do-it-yourself project, it’s likely that you will need to hire a professional to do the job anyway; and this is a situation where you’re paying twice – once with your materials and time, and again with the professional.
Be realistic about your abilities and how much time you can invest. You might end up spending more over the long haul on a project that takes longer than it should, if you’re using equipment you have to rent or get by without a working kitchen for longer than you anticipated.
Final Thought
Renovating a home without blowing the budget comes down to preparation and discipline. Be clear about what you’ll involve, research what you can afford, and have a contingency plan from the beginning. Request multiple estimates, distinguish between requirements and desires and stick with the expenditures and not let the month-end bill surprise you.
But none of this means it is guaranteed to be a perfectly smooth renovation. Things always go awry even with the best of planning. However, a carefully considered financial plan provides you with the flexibility to deal with these unexpected events without stress or panic. It’s not about having a perfect process. A complete room that you are satisfied with and that you don’t regret having when you get the final bill.
