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Managing your renovation budget

10/04/2019

Here are the top 3 things you need to know before starting to remodel your kitchen or bathroom.

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Renovations can transform your home into a beautiful space and increase its value. It’s important to plan your budget before you start renovating that kitchen or bathroom as these jobs can become costly very quickly! 

Knowing your costs and how to make sensible decisions along the way is going to help you stay true to your budget, as well as coping with any surprise costs you may encounter along the way. 

Set a clear budget

Before you begin construction you should have a clear idea of your budget. It’s important during this time that you don’t pursue the dream kitchen or bathroom to the detriment of your budget. It is also important to understand what is a realistic amount to spend on your remodel. Your budget should consider the value the renovation will add to the house, and how that compares to the rest of the market. This protects you from over capitalising and ending up out of pocket if you were forced to sell your house sooner than expected. 

Your budget should be detailed and in a format you can easily update regularly, so you can monitor any cost changes or areas that you can trim back easily if cost savings are needed. It’s also helpful to document payments made for goods or trades within the same document, to help you to track payments easily and ensure you don’t forget any costs along the way or exceed your budget. 

Needs vs. wants 

Within your renovation priorities there will be countless decisions to make on fittings, fixtures and structural approaches but luckily you've already planned a lot of this (here). This is where your budget can easily sky rocket if you don’t keep a close eye on your choices, so this is again where a detailed budget spreadsheet can help to keep track of potential surplus or pressures in your budget.

Identifying actual needs versus wants can make or break your renovation budget, and is something to keep top-of-mind when making any decisions. Will that fancy bathtub make your family any cleaner or your life any better than a cheaper alternative? Or is it just a nice-to-have? Asking yourself this question when faced with decisions can help to ultimately ensure your renovation stays within budget. 

Below is a great example of a need vs. a want: 

  • Need: stainless steel tapware = clean water for your family 
  • Want: expensive brass tapware = clean water for your family  

While both options would give you the desired outcome, the choice can come down to how your budget is tracking and if you are prepared to make trade-offs for high end fittings or other less critical choices. Break down decisions in a similar fashion to the above needs vs wants scenario in order to stay within budget expectations. 

Consider risks and a potential contingency budget

It’s common for renovation budgets to run over, so to ensure you have space to select the occasional high end option to finish that new kitchen or bathroom remodel to the standard you want, be sure to factor in a contingency budget. It is considered good practice to include an additional 10-20% in your budget as back up funds for running over budget.  

You can also consider and pre-empt any risks in your budgeting approach. Consider what could go wrong and explore those areas with a little more diligence before starting the renovation. Risk areas that typically become evident when renovating kitchens or bathrooms can include old plumbing or wet areas which have been leaking and damaged the integrity of walls or flooring. By doing a little more research and planning for risks factors, your budget should cater to any costly surprises along the way. 

This article is intended to provide general information of an educational nature only. It does not have regard to your objectives, financial situation or needs and must not be relied upon as financial product advice. Before you act on this information, you should consider whether it is appropriate for your circumstances. Information in this article is current as at the date of publication. Applications subject to credit approval and fees and charges are payable. Terms and conditions apply and are available on request.

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