4 Steps to Budget for Your Next Home Renovation
Committing to a home renovation is a big deal. While it’s much more exciting to dream about the new changes to your home, it’s important to make sure you have a solid budget for the project.
It’ll go a long way in ensuring a smooth renovation and there’s only four steps to it:
1) Know what you want
Take the time to write out exactly what you’d like to be done on the renovation. By sitting down to outline what’s most important to you, it’ll be clear where the focus should be. Should you start on the kitchen, bathroom or basement first? There are also advantages to renovating more than one room at the same time. How extensive will the renovations be? Is it a complete gut and remodel? Or do you only want to swap out the finishing?
After your wishlist is finalized, split it into two sections: “Top-Priority Features” and “Nice-to-Have Features”. This will come in handy later on if you have to cut back on what you want done.
2) Get a rough estimate of the costs for what you want
Talk to your friends and neighbours who have recently done renovations that are similar in scope. Ask how much it cost them. Then, based on your renovation to-do list, request a quote from your local general contracting company. In addition to labour and permits, don’t forget to discuss how material purchases will be handled as well. You may also want to compare quotes and references of other general contractors to get a better range of what’s out there.
3) Review your financial situation
Do you have enough in your savings to cover the estimated costs as well as an extra cushion for contingencies? If not, how much do you need to make up the difference? Once you know how much more you need, it’s time to decide whether you want to reach that figure through financing or saving up for it.
Financing, for instance, includes options like home equity line of credits (HELOCs) or loans from the bank. Before locking yourself into a new financing plan though, always make sure that your income level now and in the foreseeable future can handle repaying the debt plus interest. That means the loan repayments won’t impact your major house and food expenses, while still leaving room enough for contributions to your savings.
If you’re not comfortable with financing, then saving up is the best way to go. It may sound tedious, but you’ll actually get there a lot faster than you think with a good system in place. First, figure out how much you’re able to squirrel away every month after your non-negotiable expenses are taken out of your paychecks. Then divide how much you more you need for renovations by the monthly amount you’re able to save. That will give you the number of months you need to save up for the renovation.
With that goal set, you just have to make sure you stay diligent in your monthly savings. The most reliable way is arranging automatic monthly transfers to an account set aside for the renovation. Sometimes, that may also mean cutting back on some of your entertainment expenses. It’s worth it though in the end because you know you’re saving up for a good cause!
4) Keep a budget-tracking process in place
Pre-set reminders for yourself to regularly check up on how much of your budget is spent as the renovation progresses. You can make it as advanced as a spreadsheet tracking all the invoices as they come in. Or it can be as simple as touching base regularly with your contractor to get cost updates.
Tracking your budget for the whole project duration helps you minimize any surprises when the renovation is completed. It also lets you predict if the project will go over-budget. If that’s the case, that’s when you have to take a hard look at which nice-to-have features should be removed from the to-do list.
With the budget side of things now taken care of, keep the momentum going by preparing your house for the big remodel!
