Budgeting For Home Renovation Projects – Guidelines & Best Practices
Home renovation projects are great for your home and your soul. For your home, they add to the market value and can bring structural and/or aesthetic benefits. On the other hand, when you change the space you live in, you feel refreshed and empowered (great for the soul).
However, when left unchecked, home renovation projects can quickly go over budget. This can easily spoil your mood and bring down the benefits we listed. But you can avoid such a negative outcome by creating a realistic renovation budget. This way, you can track your spending and account for unexpected costs.
If you’re new to this, here are a few tips and best practices on how to budget for your project (most apply to other situations as well):
How Much to Spend on Renovations?
If you’re planning a major renovation (refurnishing your bedroom or redoing your bathroom), it’s best to have an upper limit for your budget. This way, you’ll have a realistic view of the costs and if you can afford to pay for it out of pocket.
To get an approximate idea of this limit, take the value of your home into consideration. Experts recommend limiting the renovation costs for one room to 10 to 15 percent of the home’s value. Otherwise, the renovation can’t be seen as adding to the value of your home.
Also, if you’re just updating kitchen appliances and not remodeling the entire kitchen, the upper limit of the budget should be lower. In a nutshell, your budget’s upper limit needs to be set in accordance with the type of renovation you want to do.
Differentiate Between Wants and Needs
Why are you doing this project? Is it because you want the house to look more inviting and aligned with modern design trends, or do you need to create a space for working from home?
Most renovation projects start with a need and scale up because of wants. For instance, you need a space for work, but you also want to change the mood in your living room. Both are valid reasons and should find a place in your budget, but if you want to limit spending, prioritize needs before wants.
This way, you can have a space to work where you feel motivated and productive, and you can take it easy with the renovation of the living room.
Do You Need to Finance Your Project?
Major renovation projects are expensive and, in most cases, unavoidable. You might have just moved into a new home that’s a bit of a fixer-upper, or you may have postponed the renovation to its limit, and now there’s no other way around it.
Regardless of the situation, there may be no way to pay for it out of your pocket. If this is the case, you have the option to get a mortgage loan for home renovations and take the pressure off your budget. Still, this is not a tool to use lightly since it will add to your debt, so make sure to do your calculations and understand all the implications.
Create a Detailed Plan
Once you know your needs and budget limits, it’s time to create a detailed plan to understand the costs (expected and unexpected). This is also useful when discussing with contractors, as it will let them know exactly what you want.
So here are a few things to include in your plan:
- Surfaces that need to be worked on
- Fixtures, finishes, and anything that needs to be changed, painted, and more
- Labor costs
- Taxes and shipping costs
- Changes to existing structures (adding a renewable energy source, for instance)
- Appliances and installation costs
- Costs for disposing of waste materials and old furniture or appliances
- Time estimates and what this entails in additional costs
Also, don’t forget to make sure your living expenses will be covered during the renovation and that you have some budget for unexpected costs.
A well-detailed renovation budget may be a bit of a pain to put together (it does require a lot of research), but it will save you money and help you communicate your needs to service providers. It’s also great for prioritizing your spending and keeping track of costs. So make sure you put in the work to get the best results!