Budgeting for Your Home Improvement Project

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Whether it’s a backyard pool or a set of new windows you’re saving up for, planning a remodel is exciting. But that anticipation can fade pretty quickly when you start adding up expenses. Home remodeling costs can rack up fast, especially if you haven’t adequately budgeted your project beforehand.

Unexpected costs can catch you off-guard, too. Your contractor pulls up the floor in your bathroom and suddenly you need new subflooring and mold removal too—not exactly the kind of surprise you were hoping for.

All of those elements make it more difficult to estimate the true cost of repairs and renovations ahead of time. However, although it may be impossible to project final costs to the dollar, it’s certainly easier to stay within budget if you understand the factors that can influence your costs.

Additionally, learning how to read your estimate and compare it to other bids will help you get the best price without sacrificing quality on the job. Below we outline some of the most common hidden costs and teach you what you need to know about estimates so your home improvement projects come in well within budget.

Ballparking Costs Before You Get an Estimate

Your contractor’s estimate will allow you to more precisely pinpoint the total expense of your remodel. But just so you don’t get caught off guard, it’s a good idea to approximate the costs on your own first.

Typically, you can expect to spend at least $200 for each square foot of the renovation, although that number may be higher if you’re planning major structural changes or want to add or move plumbing fixtures. Of course, that’s not a very precise estimate, especially considering how your region, the materials you use, and the complexity of your renovation or repair will impact your project costs. Here are some tools you can use to gauge baseline costs more accurately.

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Use a Cost Calculator. Many sites provide free cost calculators to help you ballpark the price of your renovation. These vary in quality, depending on the type of data used, as well as its age and accuracy. Modernize provides some free resources to help you determine the price of your solar energy system, windows installation, HVAC repair or new roof replacement.

Review National and Local Price Averages. Unless you’re very familiar with the type of renovation or repair you’re planning, you may find that the costs you see quoted in your research differ significantly from the ones in your contractor’s estimate. That’s because regionality influences the price of home improvements. Fluctuations in price across different markets are responsible for a lot of variance in price estimates.

The climate in your area also impacts price for certain projects. For instance, a roof that’s exposed regularly to strong winds may require specific materials for waterproofing, thus driving up the cost of your replacement.

For all of these reasons, it’s a good idea to review both national and local averages for repairs and new projects. A great resource for this is Remodeling Magazine’s yearly Cost vs. Value reports, since you can review average costs by project and locale. Other potentially useful sources of information include the US Census’s National Housing Survey and the consumer resources provided by the National Association of Homebuilding.

Request Professional Help. Hiring an interior designer or architect may not seem like the cheapest route, but it can often wind up saving you money in the long run for large projects and remodels. These professionals frequently act as a sort of liaison between you and your contractor, and they may better able to offer advice on different designs, construction techniques, and materials.

Although most professionals designers and architects charge several hundred dollars an hour for their time, they frequently offer tiered plans to help clients with various needs. An architect, for instance, may be willing to meet with you and draw up a few sketches for your project, which you can then have formally drawn up yourself by an architectural drafting service.

Coming to a contractor armed with a clear plan and a more precise idea of the materials you want will help mitigate costly mistakes and communication errors between you and your contractor.

Give Yourself Some Cushion. As we discussed earlier, home improvement projects can catch you off guard with unexpected costs. For this reason, it’s always wise to save (or borrow) more than you think you’ll need. Most experts recommend you save at least 10 to 20 percent of the estimated cost of your project.

Factors That Can Affect The Cost of Your Project

As we mentioned up top, one reason it’s so difficult to predict actual costs for a project is that there are a lot of variables at play in determining the final cost. Everything from where you live to the type of HVAC unit you choose can be reflected in the price of your project.

The Way You Finance Your Project. Ideally, cash is the most cost-effective payment method for a home improvement project, since you won’t have to pay any interest or fees. However, if you’re preparing for a major renovation, like an addition or kitchen remodel, it may take years to save the money you’d need to pay upfront in cash, especially without a  credit line. Meanwhile, you may need the expediency of a credit card or loan to cover an urgent repair.

If you’re planning on borrowing money for your project, you’ll need to factor in the additional costs of interest and loan fees. Depending on the size of your improvement project, that could add several thousand dollars to the final cost. Here are some other factors that will affect how you finance a home remodeling project.

Your Location. Regional prices affect the costs of certain projects, but your home’s specific location influences them too. For instance, you may pay more if your home is situated in a remote area that’s difficult for your contractor to get to, or if your contractor must drive a long distance to pick up materials or must have them shipped to the jobsite.

The Materials You Use. A marble countertop is always going to be lot more expensive than laminate. The materials you choose for your project can certainly impact your final price, but luckily, they’re also one area you have some control over.

It’s a good idea to research particular materials and equipment and their average prices before you begin your remodel, especially if you’re trying to stay within a certain budget.

The Complexity of Your Project. Large remodels cost more—understandably, since they require more time, and your contractor charges for labor. However, there are other factors to consider. Kitchen and bathroom remodels tend to be more expensive than bedrooms, for instance, because these rooms often include complicated plumbing systems, electrical wiring, and appliances.

Your contractor may have to subcontract some of this work to other professionals, which can increase the price. If there is any demolition, restoration work, or additional construction necessary to complete your project, that will also add to the cost.

The Age of Your Home. Building codes change pretty frequently, so if your home is over ten years old, there’s a good chance your interiors have fallen out of code.

In many places, contractors are required to bring working systems up-to-date, so don’t be surprised if he or she tells you that there are electrical outlets that need to be upgraded or wiring that’s out of whack. Depending on the scope of the updates, this can definitely inflate your project budget.

How to Save Money on Your Project

While some aspects of project planning are unpredictable, there are variables you can control to build a more cost-effective budget. Below, you’ll find a few ways to beat project bloat and shave costs off your project.

Streamline Your Project Scope. When you start sketching out a repair or improvement, it’s easy to get carried away and add in addition frills or side projects that can up the final price. Keep your project objective simple and focused, and you’ll reap the benefits on your budget. You may also be able to plan more-complex projects in phases, as well, offering more time to save up in between.

Use a Professional Design. As mentioned before, consulting with a professional architect or interior designer for some initial sketches or plans can save you some money on certain remodeling or construction projects. Make sure to check that your designer or architect offers this kind of tiered consulting, as some do not, and will expect to be kept on retainer throughout the duration of the project.

Choose Inexpensive Materials. Planning ahead can save you money (and stress) in the long run. Be sure to understand your options for various materials, appliances, fixtures and finishes, particularly in regards to price.

Take Advantage of Rebates and Tax Incentives. Certain projects may earn you tax credit through your federal, state, or local government. This is often the case with projects that improve the energy efficiency of your home. For example, homeowners who are looking to finance a solar panel installation are currently eligible for a solar tax rebate worth up to 30% of the cost of their system installation. Your local energy provider may also offer rebates for customers that install energy efficient features and appliances throughout the home. If applicable, you can also qualify for a housing grant. 

Other projects that may qualify for rebates or discounts through your local government include weatherproofing projects, such as windows with shatterproof glass. Check with your local government or energy provider for more information.

Do Some of the Work Yourself. From a general finance perspective, DIY is always a simple way to cut costs, as long as the project is within your experience level. Many homeowners find they’re able to shave costs off their estimate by shouldering some of the workload themselves. Usually this amounts to finishing work: painting, installing tile or flooring, adding moulding, swapping out fixtures and other tasks that homeowners can easily do by themselves. You may also be able to save money by taking over demolition work, as well, but make sure you know what you’re doing first. Always let experts handle complicated plumbing or electrical work, as well as structural changes.

Ask Your Contractor for Help. Contractors typically have some resources at their disposal to get you better rates for materials. Often, they have well-established relationships with vendors, and are able to negotiate better prices on your behalf. Additionally, they may have leftovers from other projects that they’re willing to let you have at significantly discounted rates. Talk with your contractor about your budget concerns and ask them for suggestions on materials savings.

What You Need to Know About Estimates

The bulk of your budget should be based off your contractor’s estimate. The process of gathering initial estimates from several contractors offers a more precise way to gauge the final cost of your project. If you get three estimates, one for $5,000, one for $5,500, and one for $6,000, you have a pretty good baseline for your final tally.

Initial estimates. Unless you’re looking at some type of emergency repair, it’s recommended that you do gather somewhere between three to five initial estimates from different contractors for each project. Keep in mind that these “initial” estimates are more like ballpark figures. Your contractor may have to adjust them somewhat when they write your final estimate or bid. After giving you a ballpark figure, your contractor may provide you with a more detailed estimate that breaks down your price per square foot. Or they may offer an estimate of time and materials—or, in some cases, a different kind of bid called a fixed-price proposal.

Time and Materials Estimates. Time and materials estimates, or T&M estimates, break down the details of your cost by—you guessed it—the time and materials needed to complete the project. Each task associated with the job should be broken out as a separate line item. Other items, such as trash removal, cleanup and other services, should also be shown. Each line item will have an associated cost next to it, adding up to your final total.

T&M estimates are a fairly common type of project estimate. The easy-to-understand format makes them easy to compare between contractors. After reviewing several different estimates, you should get a pretty good feel for the type of tasks associated with your project and about what you can expect to pay for each.

On the other hand, though, because there’s no defined scope of work built into a T&M estimate, your final costs could potentially overrun your estimate, especially if you’re not keeping careful track of your project timeline and documenting your contractor’s progress. This is one reason it’s important to read customer reviews and ask for references before you hire a contractor. You can use these resources to separate unreliable, lax contractors from upstanding ones who stick to their estimates.

Fixed-Price Proposals. Some contractors do not provide time and materials estimates. Instead, they’ll prepare a fixed-price proposal, also known as a bid. Bids briefly describe the scope of work and materials used—and of course, a final cost. They usually don’t break projects out by line item because the price is fixed. That means that once you accept the bid and sign a contract, the contractor cannot change the cost or the scope or work without an additional document, known as a change order.

Because of this, however, contractors may include some built-in cushion in their bids to make sure they don’t lose money on materials or labor. Therefore, the cost in a fixed-price proposal may be slightly higher than the price quotes in a time and materials estimate.

On the other hand, fixed-price contracts are typically tied to a fee schedule that is paid at regular intervals throughout the duration of the project. That can make costs more predictable and manageable for large projects.

Understand How Your Contractor Affects Your Budget

Regardless of the type of proposal your contractor provides, it’s important that you are able to work well together. The foundation every good relationship is trust, so you’ll want to do your homework and research your contractor’s reputation before you sign a contract. Here are a few tips for choosing a contractor and working with them while your project is ongoing.

Choose a Trustworthy Contractor. Hiring a reputable contractor is one way to save, at least when you take the long view. A bad one can leave you holding the bag for a major repair, not to mention putting your family’s safety in jeopardy.

In general, you shouldn’t use cost as the deciding factor when you choose between contractors. Contractors who offer cutthroat estimates are usually going to make up for it somehow, either with lax quality or poor materials. Instead, judge each contractor by their experience, recommendations, and references. You can also contact our representatives to be connected to a group of qualified contractors who can get your project underway.

Keep the Communication Coming. Don’t put your project on autopilot after the contract is signed. Poor communication is the number one cause of unexpected costs, so make sure you’re checking in regularly with your contractor and discussing the progress and what happens next.

Check if your contractor’s okay with texting so you can stay in touch throughout the workday. After you talk to the contractor, jot down whatever was discussed and any questions you have. That way, you can make sure all issues get addressed—before the final paint job goes on.

Don’t Change Your Mind Mid-Project. One day you want to knock out the wall and put in a master bath. The next day, you’re totally sold on a privacy divider wall. Remodeling your home is a major decision, and it’s understandable to feel jittery about committing. That said, you won’t be doing your budget any favors—or making your contractor very happy—if you change your mind constantly from one day to the next.

Your contractor should help you plan your remodel in detail before work begins, but be sure to run over your priorities and goals for your project. If it’s a large remodel, chances are good that you’ll make revisions to this plan at some point. But try to hammer out the major details before the contractor starts ordering materials. Otherwise, your he or she will write up a change order, charging you for new materials (on top of the old ones), as well as billing you for new labor costs and consultation time required to make the change.

Although home improvement projects are often unpredictable, the more time you’re able to spend planning, the less stressed you’ll feel. Taking the time to gauge project costs and plot out a clear payment plan will save you plenty of headache in the long run—and that ease of mind is priceless!

Of course, online coupons always help, too, so check out these home deals from RetailMeNot to make you feel better about the money you’re spending. Happy thrifty remodeling!

Have you remodeled your home on a budget? Tell us all about it in the comments below.

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