Home renovation budgeting is one of the most important aspects of home ownership. In my parents’ case, they knew how much they could afford and communicated that with the contractor. Today, I would definitely give them more education on the proper way to budget for a renovation. A home renovation budget requires careful planning, accurate cost estimates, and realistic expectations.
Here’s a step-by-step guide to navigating the overwhelming task of budgeting for a home renovation. You can save time, money, and frustration by taking the following steps.
1. Clearly define your Goals and Objectives.
What do you hope to achieve with your renovation? Be specific about your goals so that you can more easily identify the costs associated with achieving them. Create a list of house improvements you’d like to have and prioritize them and be prepared to discuss with the contractor your vision.
Here are some questions to help organize your plans:
- What do I want to change about my home?
- What is my budget?
- What is the timeline for this project?
- What is the scope of work?
- What are the risks and challenges associated with this project?
2. Create a list of your home renovation project requirements.
The next step is creating a detailed list of all the items you would like to change. It’s easier to remove things from your list than to add them later, so be as thorough as possible during this stage.
Some examples are:
- Replacing windows
- Installing new floors
- Replacing the roof
- Remodeling a bathroom
- Adding a deck or patio
- Updating the kitchen appliances and equipment
- Painting the exterior of your home
3. Get cost estimates
You’ll need to get a few estimates from local contractors or other specialized professionals. This is one of the most important steps.
Take the time to find reliable and reputable sources for your cost estimates. This could include:
- Online research using websites like Home Advisor to get the average cost of contractors.
- Checking with the local hardware store for accurate pricing.
- Speaking with friends or family who have recently completed a home renovation project.
- Itemizing the cost of new appliances and how you plan to dispose of bulk waste. Remember that a Dallas dumpster rental might be a lot different in price than a dumpster in Garland.
- Consulting with a professional home renovation contractor.
- One of the biggest mistakes homeowners make is not getting multiple cost estimates. You should get at least three different quotes before deciding on your home renovation budget.
4. Compare your cost estimates and create a budget.
As a general rule of thumb, allocating around 20% of your total home value towards your renovation budget is a good idea. This will give you a good buffer in case unexpected costs arise during the project.
Once you have cost estimates from different contractors or sources, you can start to create a budget for your project. Make sure to consider all the costs associated with each item on your list, as well as any hidden costs that may come up during the project.
Remember that the lowest cost estimate might not be the best. Instead, it’s important to consider all your quotes and find one that offers the biggest bang for your buck. An effective budget will consider all of the following:
- Cost of materials
- Cost of labor
- Cost of project management
- Cost of addressing unforeseen issues or problems that could arise during the project
When creating your budget, it’s important to be as realistic as possible. Do not aim low, but rather that anticipate any potential obstacles that could arise during the project.
5. Set aside some money for contingencies
There is always the potential for unforeseen circumstances to arise during a home renovation project. This is why it’s important to have a contingency fund set aside in your budget.
Some unexpected costs that could come up during the project are:
- Unexpected structural damage that is discovered during the renovation process
- The need to purchase additional materials or supplies
- Unexpected cost increases for labor or materials
As a general rule of thumb, you should set aside 3-5% of your total budget for contingencies. This will give you some wiggle room in case anything comes up during the project.
6. Be prepared to compromise.
Renovating your home can be a very emotional process. You might have a clear vision of what you want, but reality often doesn’t match up. Be prepared to compromise on some things to stay within your budget. For example, you might have to settle for a different type of flooring than you originally wanted or choose a less expensive countertop material. It’s important to remember that your goal is to create a space that you love, but you might have to make some sacrifices to stay within your budget.
7. Don’t forget the small stuff.
When you’re planning your home renovation, it’s easy to get caught up in the big-ticket items. However, don’t forget about the small stuff. Things like light fixtures, door hardware, and outlet covers can make a big difference in the overall look and feel of your space. These items might not cost a lot, but they can have a big impact. Make sure you budget for them in your overall renovation plan.
8. Stay organized.
One of the best ways to save money during a home renovation is to stay organized. Keep track of your budget, create a timeline, and make sure you’re communicating with your contractor. The more organized you are, the less likely you are to make mistakes that cost you money.