How to Create a Budget for Home Improvement Projects
There is a misconception that home improvement projects must be significant to consider creating a budget. However, we see time and time again that homeowners plan for a smaller project, and a snowball effect happens. This is when you plan for something simple, and it turns into a much bigger project than you intended. Before you know it, that straightforward home improvement project costs way more than you planned.
While scope creep can happen in any project, planning and setting budget expectations can help avoid unnecessary spending. So, whether you’re planning to remodel your kitchen or tackle updating your flooring, here are some home improvement budget tips to keep your project on track financially.
Step-by-Step Budget Setting Tips
Creating a budget for your home improvement project is a crucial step that can help you avoid overspending and ensure you get the desired results within your financial means. Here’s a step-by-step guide on how to create a budget for your home improvement project:
1. Set Goals & Define Project Scope
Start by setting realistic goals for your project. Consider what you are willing to spend and the timeline of when you want the project completed. Are those achievable? Remember, time is money. The quicker you want something done, the more money you usually have to spend.
However, before you finalize any budget, you need to define the scope of your home improvement project clearly. What exactly do you want to accomplish? Having a clear vision of your project will make it easier to estimate costs accurately. Having set your goals already, you can help decide which aspects of your home improvement project are non-negotiable and which ones you can compromise on if necessary.
2. Research & Get Quotes
Once you have a clear project scope and realistic goals, start researching. If you are taking the DIY route, you want to look at the costs of different materials, appliances, and fixtures that apply to your project. It’s easy to look at big box stores for supplies, but also consider locally owned businesses. They are often willing to work in deals for larger orders or repeat customers.
If you are going the contractor route, get multiple quotes. As contractors, we understand that everyone has a different budget. Making sure your budget expectations meet the contractors’ estimates is essential. But a warning to the wise: going for the cheapest option isn’t always budget-friendly. Make sure you consider the quality of work you are paying for so you don’t have to redo it down the road.
3. Prepare for Contingencies or Hidden Costs
No matter how well you plan, unexpected issues can arise during home improvement projects. A contingency fund in your budget will provide peace of mind and financial flexibility if you encounter unexpected challenges. There are also hidden costs, such as taxes, shipping fees, or disposal costs for old materials. Be sure to include these in your budget to avoid surprises.
4. Budget, Track & Adjust
After gathering cost estimates, create a detailed budget. You should consider sections like materials, labor, permits, and contingencies. Be as specific as possible when listing items and their associated costs. Once your project is underway, diligently track your expenses against your budget spreadsheet. This will help you stay on top of costs and make necessary adjustments if you overspend in a particular category.
Regularly review your budget and adjust it as necessary throughout the project. If you decide to make changes or upgrades mid-project, update your budget accordingly.
How Much Should Home Improvement Projects Cost?
Home improvement budgets can vary widely depending on your home’s value, location, and specific projects you want to undertake. Here’s a rough guideline on the percentage of your home’s value that you might consider allocating to different types of home improvement projects:
- 1-3% of home value for maintenance and repairs.
- 5-15% of home value for kitchen and bathroom renovations.
- 10-20% of home value for basement or attic conversions.
- 5-10% of home value for landscaping.
- 10-20% of home value for room additions (additional bedroom or living space).
- 1-3 % of home value for cosmetic updates (fresh paint, new floors, and fixtures).
- 2-5% of home value for energy efficiency improvements (upgrading insulation, windows, HVAC system).
- 1-2 % of home value for smart home upgrades (security, lighting, and climate control).
- 10% of the total budget for contingency plans.
If your initial budget estimate exceeds your available funds, it’s time to prioritize. Decide which elements of your project are most important and consider scaling back on others. You can always tackle less critical aspects of your project in the future.
Ways to Pay for a Project
Paying for a renovation budget can be done through various methods, depending on your financial situation, the size of the project, and your preferences. Here are several ways to pay for a renovation budget:
- Cash Savings
- Home Equity Loan or Home Equity Line of Credit (HELOC)
- Personal Loans
- Credit Cards
- Refinancing Your Mortgage
- Home Improvement Loans
- Contractor Financing
- Government Grants and Assistance Programs
- Crowdfunding from Family and Friends
At 7th State Builders, we offer 0% financing for those who qualify. It’s a convenient way to help pay for a project you don’t have all the necessary funds for upfront. Just remember creating a budget is critical for the success of your project. Also, flexibility is vital, and having a well-structured budget will help you navigate any surprises that may come your way during the renovation process. If you need help scoping it out, getting materials costs, applying for permits, and making your dream project come true, we are here to help! Contact us today to get started.
