Developing a Realistic Budget

Home interior broken down to studs during remodel
Review these simple tips about developing a budget from the National Association of The Remodeling Industry. 

Determine What You Can Afford

It may seem obvious, but homeowners often expect a remodeling contractor to create a budget for them. This is never a good idea! A contractor wants to provide you with a luxurious renovation, which may or may not, be a good fit for your budget. Prepare a budget ahead of time, well before speaking with a contractor.

Keep a Reserve

Once you determine how much you can afford to spend on a remodeling job, decrease that amount by 10 to 20 percent. This reserve should be put away to cover any change orders or incidental charges accrued along the way. This will prevent a frantic scramble for additional funds at the end of the project. Murphy’s Law states “if it can happen, it will happen”. Keep this in mind when planning for incidentals.

Keep “Change Orders” to a Minimum

It is easy for a homeowner to say, “A little more on this fixture doesn’t matter....It won’t cost much more”. Unfortunately, having that attitude also makes it easy to overextend a prepared budget.

While it’s rare that remodeling projects continue without a single change order, homeowners can keep them to a minimum by sticking to their original plans. A change order is a written document detailing any requests to alter, change or remove any items found in the contract or project.

There are three key reasons change orders pop up: (1) The homeowner initiates a change because they have changed their mind about the design or a specific product, (2) Unexpected damage was found (termites, for example), or (3) A code violation is uncovered that affects the project.

The proverbial, “While you’re at it…” phrase can destroy a budget. While it’s tempting for a homeowner to have his/her remodeling contractor complete handy work, it’s good to remember that any work not specified in the original contract will have an additional cost attached to it.