How to stick to your home improvement budget


Home improvement projects can be costly, whether it’s installing a pool that rivals your neighbor’s, adding a mother-in-law suite to your home or simply replacing a sink and toilet in the guest bathroom. The price tags for these projects can invoke feelings of dread, especially when you’re trying to complete budget home improvements and keep costs low.

There is no need to panic, though. All it takes is some careful planning to improve your humble abode and increase your home value without breaking the bank or blowing the home improvement budget.

How to create a home improvement budget
Step 1: Determine your goals

Before creating a road map for a home improvement project, determine your goals. You may simply need to refresh your house with paint and new carpeting. If that’s the case, you can find the paint and flooring you like and calculate the cost of materials and labor.

Some home improvement projects aren’t that simple, though. Perhaps you’re fed up with cooking in a tiny kitchen that doesn’t function well and you want to overhaul that area. With limited space, it can be easy to jump to the conclusion that you need an addition to meet your kitchen needs. Expanding your home by 200 square feet to accommodate that upgraded kitchen can cost more than $50,000, though, which is out of the realm of possibilities for a lot of homeowners. You may be able to achieve your goal by installing new cabinets or expanding your kitchen into an adjacent dining room instead.

Take a long, hard look at your home and make a list of problem spots. Look for ways to improve the appearance and functionality of your home without displacing everyone or costing an arm and a leg.

Also take into consideration how your home improvements will affect its value. If you install a pool in your backyard, it may increase the value of your home by 7%, but if you spend $40,000 to install a pool on a property valued at $200,000, you won’t see a return on your investment when it’s time to sell.

It’s also important to keep in mind how increasing the value of your home will fit with the local market. Some homeowners over-improve their homes, which in turn drives the value above market prices. If you aren’t planning to stay in your house for the rest of your life, only make improvements that will give you a solid return on resale.

Home improvements can add value to your home but they can also drive up your living costs. Pool maintenance can cost as much as $1,800 per year, and adding an extra room to your home can increase your electricity usage. Keep in mind that once you’ve increased your home’s value, you may need to increase your home insurance coverage, too.

Once you’ve determined your goals, prioritize your home improvements based on your needs.

Step 2: Create remodeling plan with cost estimates

To put your home improvement plan in motion, you must first decide when to start. Summer is the worst time to implement a home remodel because it’s the busiest time of the year for contractors, laborers and suppliers. September through December aren’t much better, since many homeowners try to squeeze in renovations after their kids return to school and before the holiday season.

The first few months of the year are the best time to start a home improvement project. Plan for that time if you want to save money, and start your cost estimate by deciding how much of the work you can do to help lower expenses. Even the most inexperienced homeowners can handle tasks like moving furniture, sanding window frames and removing carpets.

If you plan to demolish walls or add a room, you likely will need to hire an architect and pull permits to ensure your project meets safety requirements. Some architects will work for a flat fee to consult or complete plans for small home improvement projects.

You also need to create an estimate of material costs. Decide if you need to purchase new materials or if repurposed will do. You can often find cabinets, doors, fixtures, hardware, lighting and windows at businesses that specialize in used building materials, or keep an eye out at auctions. Before you purchase anything, make sure you have accurate measurements to calculate the cost of items such as floor tiles and carpeting.

If you’re using a contractor, make sure to include additional costs such as contracting fees and labor wages. Most contractors charge a fee equal to 10% to 15% of the project budget.

Keep in mind that you may have some personal costs that are incurred while the project is underway. You may need to move out during construction or send your pet to pet daycare to avoid the trauma from construction noise. Incidental costs, such as higher than average electricity or water bills, or disposal of discarded building materials, should also go on the budget.

The most expensive home improvement projects include kitchen and bathroom remodels, new flooring and roofs, electrical upgrades and replacing exterior siding or windows. Budgets for these types of projects can benefit from sweat equity and repurposed materials.

Step 3: Do your research when hiring a contractor

Google “contractor horror stories” and you’ll get a good idea of why it’s important to find the right contractor. Ask coworkers, family, friends or trusted real estate agents for recommendations. Many states require contractors to have a license. States that do require licensing often have online license lookup tools for you to check a contractor’s credentials. You can also check the Better Business Bureau website to search for reviews and complaints about a contractor.

When interviewing contractors, be sure to find out:

How long they have been in business
The year they first obtained a contractor’s license
The address of the contractor’s office
Whether they have insurance for personal liability, property damage and workers compensation
When they can start the project and how long it will take to complete

Before requesting a bid, ask the contractor if they have worked on similar projects and get a list of references. Take the time to speak with past customers, and when possible, request to see completed projects on site.

Always try to get bids from more than one contractor. A contractor should give you a written estimate that details all costs, including contracting fees, labor materials, disposal fees, inspection fees and permits, along with proposed start and completion dates. Typically contractors will require a deposit when you sign the contract. Cost is important, but always choose a contractor that offers the best combination of experience, expertise and cost efficiency.

Step 4: Assess your financing options

Many home renovations aren’t cheap, and if you’re looking to do more extensive renovations, you will probably benefit from knowing how you can finance your project. Financing options include:

Government-backed loans: Some homes qualify for a government HUD Title I Property Improvement Loan, which offers negotiable fixed rate financing.
Home improvement loan: A home improvement loan allows you to upgrade your home without using it as collateral or spending emergency funds or retirement savings to cover the cost.
A home equity loan: A home equity loan enables you to cash out some of your home’s equity, which you can use to finance your project. You’ll have to pay back the home equity loan but this type of financing usually has lower interest rates than some of the other options available.
HELOC: A home equity line of credit uses your home as collateral. This type of secured financing gives you access to a revolving line of credit and usually offers a great interest rate.
Credit card: Using a credit card is one of the least desirable ways to finance a home improvement project, especially if your card carries a high interest rate. However, for small, inexpensive projects, a credit card may give you the purchasing power you need. If your project only requires a few thousand dollars to complete, search for credit cards that offer no interest for the first year.
Tips for sticking to your home remodel budget

The best way to stick to your home improvement budget is to carefully plan your project before it starts. There are tips to keep your budget in check, including:

Always have a plan

Expect the unexpected when venturing into a home improvement project. Renovations sometimes miss their completion dates, so always start a project with ample time to finish. If you intend to stay in your home during renovations, make sure you have a backup plan in case you need to move out temporarily. Broken pipes or cut electrical lines can occur during construction, and some homeowners think they can withstand living in a home during remodeling until the jackhammers start pounding. Decide where you can stay if you need to leave for a while before you start a project.

Always have a contingency fund

Some home improvement projects stick to the budget, but many don’t. Deposit 10% to 20% of your total budget into a contingency fund to cover unexpected expenses. Renovation mishaps such as broken windows and damaged furniture can occur during renovation projects, and contractors sometimes notice unexpected problems, such as old wiring or corroded plumbing, that need to be fixed to complete the project.

Act quickly on home repairs

Many home improvement projects stem from neglect. Maybe you thought about getting that leaky roof fixed, but you never got around to it and that last big storm caused leaks that ruined your hardwood floors. Address home repairs when problems occur, because the best way to avoid costly renovations is to follow a regular home maintenance schedule.

A few more tips to keep your budget in check include:

Don’t let fancy designer products dazzle you. The latest smart refrigerator might look appealing, but cheaper conventional models still do a great job of chilling cold cuts and juice boxes.
Hire an experienced, reputable contractor. Home improvement projects sometimes go over budget, so it pays to work with a professional who can prevent costs from spiraling out of control.
Don’t change your mind. Once you work out the costs and details of your project, stick with it and don’t make major changes that can drive up costs.
Use repurposed materials whenever possible. Some used materials, like antique floor tiles, can add character to your remodel, while cutting costs.
Pick up, not delivery. This should be your mantra. When you pick up building materials you avoid delivery fees, which helps you save on your project.
Sell or donate discarded home elements. You can often make money by selling your old doors, kitchen cabinets, light fixtures and undamaged flooring to a used building materials company or in a garage sale. If you donate your items to a charity such as Goodwill or the Salvation Army you can claim it on your income taxes.
The bottom line

Home improvement projects don’t have to be scary or overly stressful. Take your time during the planning stage, consider your needs carefully, hire a good contractor when needed and stick to your budget. In the end, you’ll have a more comfortable and valuable home to enjoy.

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