If there is one tool that every home renovator should use, it is this: a well-researched, realistic budget. Achieve your home reno goals with our guide to setting a renovation budget.
Home renovations usually begin with humble goals: increase the value of the home, improve the function of the space and increase appeal to potential buyers. But even the most well-intentioned renovation can blow out with one unexpected or emotional decision, letting goals fall out of focus. More often than not, exhausted finances (and minds) could have been saved by sticking to a renovation budget.
The key to a successful, less stressful home renovation is setting a realistic budget. Even if you don’t budget in your personal finances, a renovation budget will safeguard against overspend and protect you from financial freefall. But more than keeping your spending in check, a thoroughly researched and well-established budget is arguably the most important tool in the entire project; it will influence every decision you make. From fixtures to flooring, understanding how much you can spend from the get-go will dictate the end result.
If that puts a damper on your renovation dreams, consider this: narrowing down what you will spend, on what, and where will save you time and stress and deliver a better renovation experience overall. Using the guidelines from your budget, you can clearly communicate the goals of your project with contractors, receive more accurate quotes and, ultimately, end up with a renovation that matches your vision. And if the goal of your renovation is to increase the value of your home, a budget will keep more profit in your pocket when you sell.
Keep your renovation goals top of mind and create a more effective renovation process using our guide to setting a renovation budget.
Estimate your budget
Determine how much you can afford and the scale of the renovation. As a general rule, small scale home renovations might cost 5 – 10% of the purchase price of your property, medium scale renovations 10 – 20% and large scale renovations 30% or more. Some experts recommend spending 5% of the overall value of your home on the kitchen alone. Whatever the budget and scale, ensure that you can financially support the entire project. Once you have a number in mind, break down the cost of each room you plan to renovate by percentage and assign a dollar value to it.
Plan on the unexpected
Even though you hope the renovation will be straightforward, always bank on the unexpected and include a contingency plan. Generally, your contingency should be 10-20% of your overall budget. Choose to increase your budget overall or adjust your numbers within the budget to accommodate the buffer. In the best-case scenario, you won’t need to use the money. But if you do need it, you won’t stress because you have prepared for the unexpected.
Create a spreadsheet
Organising your budget in a spreadsheet is the best way to begin. If you are doing an entire home renovation, start with each room and then break them down by line item. Tracking expenses in one location means you will know exactly how much money you can spend and where. If you don’t know where to start, download our Home Renovation Budget Template to use as a starting point and customise it for yourself. Even if you aren’t the savviest with a spreadsheet, you can set up your own budget with paper and pencil.
Create a separate bank account
While it might be tempting to purchase everything on credit card, consider having a separate bank account for the renovation. One account dedicated to the renovation will ensure your personal finances don’t get lost in the mix. Even if you do purchase with a credit card, pay them off from this account.
Be aware the danger of seeing one number, though. It may look like you have a lot of room for that upgrade in flooring when in fact every cent is already accounted for.
Dream big, then narrow down
Start with your wildest dreams and include a line for everything you want. Those top end appliances? Put them in there. The beautiful backsplash imports? Itemise it. Absolutely everything you can think of – and the labour costs – include it.
Think about where you will spend and where you will save. Where do you really want to make an impact? What is the most important feature for the space? Where can you opt for the low-cost version? Highlight these areas.
Evaluate every item using what many refer to as the SMART method: specific, measurable, attainable, realistic and timely. In the columns next to each item, fill out the spreadsheet asking the following questions:
- How much will this cost?
- Is it readily available in my area?
- Is this going to fit in my budget?
- How long will it take to complete this?
If you find that a line item has a high cost, doesn’t fit in your budget, isn’t available where you live, or will take too long given your timeline, cut it out or look for an alternative. Remember, these are dream items, and there are many creative ways to achieve the same aesthetics without splurging.
Maybe you aren’t the most skilled at painting or landscaping, but you probably have friends or family who are. Look at your list of labour costs and decide what you will do yourself; this is a great option for tight budgets. The good will of your network can only go so far, though. A few hours on a Saturday or two might be all you can ask of your network without jeopardising relationships.
Beware of overestimating your abilities, too. Be honest with yourself and acknowledge that laying the flooring may be a bigger task than you can handle. Knowing your limits will save you money and time later on, as you may need to hire someone to fix your work or start from scratch, and usually to a tighter, more expensive deadline.
Invest the time to research and request at least three quotes for each contractor your need to hire. You want to ensure you bring the right people on the project. Read as many reviews as you can, such as Google reviews, to get an honest understanding of a company. Don’t just take your mate’s word for someone being good – back it up with research.
Consider fixed term pricing when requesting quotes. Fixed term pricing is often slightly more expensive as the contractor assumes all the risks that will delay or costs of the project while you only pay one price. Fixed term pricing usually specifies what is included and what is not, and extra work is often added in an additional agreement. Other contractors may offer a lower price, but you assume the risk for additional labour and material costs should they arise.
At Design Plus Drafting, we use fixed term pricing to guarantee both quality and timeline to our clients. Getting the designs for your renovation completed quickly and to the highest quality is crucial in getting your renovation completed. Should anything take longer to complete, we assume the cost of labour, not the client.
Review, review, review
Monitor your budget throughout the entire renovation. The “set and forget” approach does not work in home renovation as the cost of labour and materials fluctuates in real time. Schedule in time each week to review your budget and be diligent about inputting actual costs. As the project progresses, you will be able to see where you can spend money or if you need to cut costs, which usually comes down to the final finishes. You will also feel more in control of your project, which will ease stress and worry about going over budget.
So, while the initial time and effort to set up your renovation budget might seem tedious, the pay-off is a renovation that matches your vision, stays within your financial boundaries and achieves your original goals. You might even enjoy a bit of extra cash in your pocket, too.
Looking for more home renovation advice? Check out our blog with more tips like how to survive a renovation and how to create the perfect floor plan, or give us a call to speak with our expert building designers at (02) 9565 2265.