At some point in their home-buying journey, most homeowners plan updates for their homes to make them more comfortable and convenient or to make necessary repairs. One of the biggest obstacles to making these changes is money. Things like supplies and labor costs can add up quickly and cost much more than anticipated.
Good budgeting can not only prevent these kinds of miscalculations, but it can also help you prioritize and plan for the long term. Though creating a budget for large projects can be daunting, it becomes easier when you break it down into manageable pieces. This method allows you to set a maximum overall budget and allot parts to different project areas.
Whether you’re moving into your first home or want to refresh your current one,
Build a Budget During the Design Phase
Itemizing projects and listing the materials you’ll need for each one is an efficient way to begin building your budget. For instance, if you’re renovating your kitchen, list each change you want to make, from replacing the cabinets to painting the walls and updating appliances.
Next, research the cost of materials for each project. No detail is too small to leave out—aesthetic items like cabinet hardware, trim, and tile can be pricey and may take up more of your budget than you’d think. Additionally, keep in mind that these prices may fluctuate with the market, especially if you’re planning ahead. You can either buy materials ahead of time if you think they’ll be more expensive later or purchase them closer to your renovation date if costs appear likely to drop.
Prioritize Urgent Needs vs. Conveniences
Everyone wants to live in a home with beautiful fixtures and creature comforts. Still, necessities like new wiring, roof repair, and insulation upgrades must come first. Prioritizing structural needs ensures any changes you make later will last for a long time.
Few things are more frustrating than finishing the perfect living room only to have your roof give way to water damage. Plus, these structural fixes can be expensive, so planning them first will save you time for cosmetic changes and functional upgrades.
Budget for Ancillary Costs
In addition to the cost of materials, there are ancillary costs you should anticipate and add to your budget to ensure you save or finance the right amount of money.
Some of these additional costs may include: ● Labor fees
Like the cost of materials, labor’s price fluctuates based on the market, your area, and even the season. Some contractors may charge more for winter or mid-summer labor because of the severe weather. ● Builder’s risk insurance
If you’re adding a new structure to your property or putting an addition on your home, builder’s risk insurance covers damage to the new structure during construction. Builder’s risk typically covers damage from severe weather, fire, vandalism, or theft.● Contingency budget
This is padding in the budget in case of emergencies, delays in construction, or hidden fees. ● Cleanup costs
Depending on your project size, renting a dumpster or hiring a debris-removal crew may save you a lot of time and energy. ● Alternate accommodations (if necessary)
If your renovations are extensive, take a long time, or are just too loud for your home’s children, pets, or elderly adults, it may be wise to budget for short-term accommodations. Extended-stay hotels or short-term rental homes often give discounts in the off-season, so you may want to plan your projects accordingly.
Consider Return on Investment
Return on investment (ROI) is the amount of money your home is worth after you’ve lived in it for many years. Upgrades and renovations are an excellent way to increase your ROI, but spending more than you’d get back is unwise.
For example, if you purchased your home for $350,000 and lived in it for ten years with no improvements, it may be worth $400,000 when you decide to sell it. Spending $15,000 on renovations may increase the resell value to $425,000, leaving you with a $10,000 ROI.
However, the more you spend on upgrades, the smaller your ROI becomes in comparison. Experts recommend spending no more than 15% of your home’s worth on upgrades to get the maximum resale value.
Jenn Walker is a freelance writer, blogger, dog-enthusiast, and avid beachgoer operating out of Southern New Jersey. She writes for Philadelphia Chapter 13 bankruptcy lawyer David Offen.
