Hi guys! Today we’re going to talk about a “healthy budget” for home improvement. Many people ask me on Instagram (follow my account for real-time updates here) for price breakdowns for my projects and for help managing their budget. Today’s post is about a) setting budgets that match your lifestyle and income; b) budget management for your projects and how to mitigate costs; and c) suggested tips and learned lessons for reducing project expenses.
I always like to caveat that the below has worked for me and my family. Everyone’s family and financial situations are different – I do not expect to account for every nuance in your budget. I do believe, however, that with discipline and a few base principles, you can create financial opportunities to improve your home – whether you rent or own.
We set a small manageable monthly budget for home improvement – everything from paint to furniture to décor was itemized and scheduled.
When Mike and I first got married our budget was tight. Not only did we rent a small one bedroom in the Bronx, we couldn’t fit “luxuries” like refreshing our furniture into our budget. We set a small manageable monthly budget for home improvement – everything from paint to furniture to décor was itemized and scheduled. It was the best we could do at the time. Guess how much?…. $25. Yes, $25/month was all we could afford to put towards our apartment. We had the basic furniture pieces for each room (bed, dresser, sofa, dining room table and chairs) and everything else was extra.
Set a Home Budget that Matches your Income + Be real about it.
I’m not going to get all preachy and tell you to live within your means – that’s not my business. But I will say to be realistic with your budget and use the following suggestions:
- Set a monthly minimum. Our was $25. Your budget could be $25 or $250 – whatever is reasonable for you. Remember that this is just the minimum – some months your budget will increase (around the summer ours went up!), maybe you’ll receive gift cards, etc. I also suggest slowly building your budget each year. Add $10/month, maybe add in a $400 furniture allowance bi-annually so you can splurge on new décor pieces, etc.
- Think through what you want to improve and divide projects by room and category. Stating “my home is so dated, I need new furniture” is unproductive and will not help you plan for a refresh/upgrade. Stating “my living room lacks functional storage and seating” sets a goal, identifies the problem and solution, and will keep you focused on one ‘problem’ area of your home. Now you can dedicate your monthly budget towards living room storage solutions, plan for your new furniture purchase, research comfortable furniture layouts, etc. Unless you have an unlimited budget, it is unlikely you will redo your entire home in one shot.
- Identify and prioritize what you want to fix first. I base my projects on these criteria:
- Functionality. What project/improvement will make my living room/bedroom/office/kitchen, etc. function better? What is the problem (storage, lack of organization, lack of seating, etc)?
- Aesthetics. Do I enjoy being in this room? Does it match my/my partner’s style? Am I embarrassed to show this room/space/closet to my friends?
- Project Scale and durability. Is this something I can do or I have to hire out? Will it disrupt my entire house? How long will it take? Is this style/design trendy and will it be dated/expire in X years? Will it last (e.g. Ikea furniture has a short life-span) or will it have to be replaced soon?
Stating “my home is so dated, I need new furniture” is unproductive and will not help you plan for a refresh/upgrade. Stating “my living room lacks functional storage and seating” sets a goal, identifies the problem and solution.
7 Tips for your Project Budget…
- Phase your project. If possible, phase the project in stages. Not only does this help you budget, it will help you solidify your design decisions, shop around and compare prices, and make sure that your decisions are not too trendy/will get old soon. I talk more about suggested ways to phase projects (even decorating and staging) here. Also, anticipate soft costs. (Hard costs are materials, labor, direct project expenses and soft costs are permits, licensing, architects, engineers, “paperwork”, etc.) Plan for licenses, permitting fees, up-ing your insurance, etc for larger renovations. Even smaller projects (such as refreshing your living room or updating a bedroom) will incur soft costs so plan in advance.
- Multiple bids! If your project requires a tradesmen or hired help, get multiple quotes (bids). You do not lose anything by receiving 2-4 bids per trade (plumber, electrician, engineer, painter, etc). The cheapest/lowest bid is not always the best – look into why the bid is so low, especially if the other bids you received were around the same price point.
- Plan for the unknown and add a contingency. Anticipate some hiccups – even if you have done all your research and all the planning, there will still be variables. Add at least 10% of your budget for unknown – asbestos, damaged materials, returns, weather delays, added insurance costs, you never know.
- Your budgets will get better over time. By the third or fourth project budget, you’ll have worked through what line items to include, how to link your project budget and timeline, etc.
- Give your subcontractors a bonus. This may seem odd but encourage your subs (if you’re using any) to stay on schedule and on budget by offering a 5-15% bonus at the end of the project. Why would you do this? Because it will motivate tradesmen to schedule and prioritize your project – especially if they are a big shop and this job is smaller than their typical
- Schedule your DIY! Treat your DIY projects the same as if they were being outsourced – add “DIY Days” to the schedule, coordinate access with other subs who will be onsite and budget your materials. DIY does not always been “cheaper” so make sure your hard costs (costs of materials and labor) are accounted for and monitored.
- Research tax abatements and reimbursements available. If you live in a cooperative or condo, contact your board of managers for information on capital improvement reimbursements. If you make permanent upgrades to a component shared by residents (e.g. heating upgrades), you may be entitled to a partial reimbursement. Even if you live in a rental unit, contact your management company or landlord. The landlord might deduct expenses from upcoming rent, especially if the improvements will last past your stay – for example re-finishing floors, tiling work, etc. And if you’re a homeowner, you may be able to depreciate the costs of your materials and permanent fixtures (permanent fixtures are integrated into the house, such as cabinetry and tiling). This can add up to a significant deduction on your taxes! We were able to deduct $14k in appliance and material purchases our first year!
What do you use to manage your project finances? Share what you’re using and how you’re tracking your project finances below. I’d love to hear from you guys.
Happy projecting and stay focused – you can do this!
Tiarra
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