Few things in life are as certain as the fact that if you’re planning a home improvement project, it’s going to cost you money. Depending on the type of project, it could be a lot of money or it could be very little. When done well, these improvements prove to be wise investments as they can increase your property value. But one thing all home improvement projects have in common is that for success, they need a solid budget. Not just, this is what we have to spend, but knowing every detail down to the smallest purchases and having a plan for those pennies. Here are our top four tips for creating – and keeping – and iron clad budget.
Renovation or Remodel: Research
Right out of the gate you need to know what exactly you’re planning to do. Not just what room is due for a makeover, but the type of project you’re engaging in. Renovating and remodeling seem like interchangeable terms, but they are the difference between a lot of money and a bang load of money, as well as the type of work you can expect to have done. Renovations are the more expensive endeavor with either a complete gutting of the room and starting from scratch, or changing the structure/layout of your room. Remodeling, on the other hand, only upgrades a few of the major components of your room and focuses mainly on visual appeal.
Now that you know what type of project you plan to undertake, you can begin researching accordingly. This includes figuring out what types of permits you will need for the work you’re having done. Pleading ignorance will not get you out of paying fines for neglecting your permits. While the final price tag is going to depend on labor, materials, and other elements, researching the correct type of project will help you narrow the scope of what you can anticipate spending. Which helps prepare you for the next step.
Acquiring Funds
Before you commit to throwing down an obscene amount of cash, it’s always best to know how you’re going to acquire the funds first. Again, the type of project and amount you’re anticipating to spend will play into where you get the funds. You can resort to savings (the best option since it’s already in the bank and won’t accrue interest), use up a juicy tax return, take advantage of rebate offers, or look into home equity. Home equity allows you to borrow against the value of your house. Home equity borrowing comes in the form of a loan (a lump sum supplied to you at one time) or a line of credit (an amount available from which you can draw over time).
With loans or lines of credit, there’s one piece of advice you really want to take to heart. Never borrow more than you can comfortably pay back. Interest rates need to be factored in to your decision, as well as the added cost to your monthly overhead. Home improvements are a grand idea, but not worth falling into financial strain or hardship.
Hidden Fees
Not the fine print no one ever looks at in a contract, but the seemingly little expenses that add up that you simply don’t think about. If you’re renovating your kitchen, the extra cost of eating out while you don’t have use of your kitchen takes a toll on your wallet. Redoing floors that require an overnight set? Staying in a hotel costs money. Storage units for your furniture while you flip your living room is another “hidden fee”. Talk to your contractor about the possible inconveniences you might encounter along the way so you can set aside money for whatever pops up. This does not replace your emergency fund!!! You still need to allot 20% of your final budget to emergency situations. You may not need either sets of funds, but don’t touch them until it’s all over. Anything you don’t use can be put back into repayments, or used to treat yourself to something nice for the new room.
Organization Is Key
Lastly, you want to get organized and stay organized with your budget. The best way to do this is by creating a spreadsheet that itemizes every expenditure from labor to decor. Print a copy for you, your partner/spouse, and your contractor to reference whenever the need arises. Check it everyday, like you do your bank account, to stay on top of where your money is going at all times. The best way to keep from falling behind is to stay ahead of the curve.
There’s a lot that goes into a renovation.