Home improvement projects aren’t nearly as enjoyable as HGTV’s renovation projects.
Tasks like cleaning the HVAC ducts or repairing the roof are not as appealing as a fancy kitchen remodeling. And in real life, you’re faced with the responsibility of paying to get the job done — having to fork out hundreds or thousands of your hard-earned cash.
Numerous households owners end up funding costly home repairs, but setting up a home renovation budget will keep you from increasing your debt load.
Planning ahead of time for all your home improvement needs (or wants) gives you time to save on the costs you face. Here are five items to remember when constructing a household improvement budget.
In this Article:
Dream About What Needs To Be Done
As a homeowner, you’re going to run into items that require regular maintenance work, such as clearing leaves from the gutters or cleaning your pump. You may also have a clear idea of problems that need to be tackled soon, such as a leaky roof or an A / C device on its last leg.
Start planning for these expenses by mentioning all your upcoming tasks. Think of what you want to do in a year’s time, but also remember the job you hope to do in a few years ‘ time. The longer the timetable you’re giving yourself to save, the less money you’re going to have to squirrel away every month.
Consider how much wiggle room you have in your key budget when planning what tasks you need to do. If you have a lot of discretionary income and you can comfortably set aside a few hundred dollars a month. But if you’re living a paycheck-to-pay check, give yourself some time to save.
Prioritize What You Need To Do First
Chances are you don’t have a single project on your home to-do list. When designing your home improvement budget, give priority to the most important repairs over the nice-to-have improvements.
Another thing to consider: are you going to need a minor repair or a complete replacement? Having a plumber come out and repair a problem with your toilet, for example, would cost less than having a new toilet built.
When it comes to non-essential tasks, such as replacing the backsplash in your kitchen or updating your appliances, prioritize work based on what gives you the most satisfaction — or what gives you the most resale value if you intend to sell your home in the near future.
Get Multiple Quotes To Assess the Cost
You may have an idea of how much you can afford to spend on a project, but you won’t be able to budget the job properly until you get quotes from potential contractors. Look for bids from at least three different suppliers so you have options — and so you know you’re getting a fair deal.
You can even be able to negotiate a cheaper price from your chosen contractor by telling them that a better deal is being offered by a rival.
Jill Emanuel, financial coach at Fiscal Fitness Phoenix, told The Penny Hoarder that she had received five quotes when she had removed her entire air conditioning and ducting system last spring. She also suggests checking out home improvement blogs and podcasts, watching YouTube videos, and asking friends and family for advice as part of your study.
Set up a Sinking Fund To Save Money Over Time
When you know which tasks you need to tackle and how much it will cost you, it’s time to set up a strategy to save on those costs.
Instead of having a loan and paying over time (with interest), start putting money away little by little before you can pay for the expense and you don’t have to get into any debt. It’s called adding to the sinking fund.
Say you’re going to replace your existing fridge with a new one that costs approximately $1,200. By investing $200 per month in your sinking fund, you’d get the cash to buy your new refrigerator in six months. If you could afford to save $300 a month, you’d have the money in four months.
Pro Tip
Often a project can’t wait until you’ve got all the money together. Here are the easiest ways to fund home improvement projects.
Even if you don’t have any particular home improvement projects on the horizon, homeowners should regularly set aside money for potential home repairs and maintenance work. The general rule of thumb is to save between 1% to 3% of the value of your home each year.
“If we can be used to putting even a few hundred dollars [in] savings every single month, label that accounts for home repairs and projects,” Emanuel said.
Hold Your Money in the Emergency Fund
Despite our best preparation, there’s always anything we can’t prepare for — such as a bad storm that floods the basement or a neighbor’s kid who throws a baseball through the window.
That’s why it’s necessary to hold money aside in an emergency fund (and have an appropriate home insurance policy).
Personal finance experts suggest investing from three to six months in an emergency fund. This isn’t the money you’d tap into for regular home repairs or a scheduled outlay, including a remodeling. Your emergency fund money should be spent on expenditures that are urgent, unforeseen and necessary.
Homeownership costs will far exceed the down payment and monthly mortgage payments, but with careful budgeting and saving, you’ll have the money to keep your home in good shape for years to come.