For most Americans, buying a home is the single largest investment they’ll ever make in their lifetime. So it should come as no surprise that — whether done to enhance livability, to add value, or due to a combination of these motivating factors — it’s common for American homeowners to want to improve the homes they take pride in. In fact, according to a late 2023 survey by well-known toolmaker Craftsman, two-thirds of American homeowners say they plan to make improvements to their homes in the next six months to a year.
How to budget for home renovations
Let’s face it, though — whether they do the work themselves or hire a contractor, for most Americans, carrying out substantial home renovations can be a significant financial challenge. According to a 2023 Houzz study, the median price for a home-renovation project in 2022 was $22,000. And the same study found that 27% of homeowners performing home renovations run into challenges keeping the job within their budget — making pre-project planning essential for those who want to avoid the same fate.
Looking to do some renovations to your own home in the near future, but concerned about the costs getting out of control? Saving for home renovations and carefully budgeting for home renovations can help you keep the impacts on your pocketbook in check. Consider these nine tips for creating (and sticking to) a budget for your home-renovation project:
- Have a solid plan in place — Often, home-renovation projects have a tendency to snowball. What may start as a simple and inexpensive vanity replacement in the bathroom can quickly turn into much more. For example, the homeowner may suddenly realize the vanity change will create a fixture mismatch in the shower. This could lead to a clash with the flooring color, then a realization that the cabinets and paint need updating … and the costs go up as the list goes on. Before you dive too deep into project planning and execution, create a list of all the potential upgrades you’d like for your project to encompass, carefully considering how each may impact the overall aesthetic and functionality of the room you’re renovating.
- Determine your must-haves — Once your list of potential improvements is complete, separate the list items into wants and needs. Next, carefully consider each item in the wants list. Which ones are you willing to compromise on? Which are you willing to splurge on? With your target overall cost in mind, nail down the list items that you definitely want to move forward with, then do the research needed to estimate the price for each of your choices and your total renovation cost. If your plans come with a price tag that exceeds what you’re willing to put into the project, you may want to consider limiting the scope of your renovations or waiting until you’ve saved more money to fund them.
- Keep your cost estimates — When completing the step above, be sure to retain a detailed list of what you’d like to get done and the cost estimates for each element of the project. Be sure to do all your homework to get a solid idea of what the materials and labor for the elements of your project should cost. Shop around to get pricing on any fixtures and appliances your project may involve, and consider consulting an online remodel cost estimator to get a better sense for how much the labor and materials involved should cost you. Having all of this information in hand will help ensure that you can clearly communicate exactly what you’re looking for to the contractors you contact for their bids on the project, and it will help you better judge whether the estimates they provide are delivering a good value.
- Set a firm ceiling — With the full scope of your renovation project nailed down, set a firm ceiling on the total price you’re willing to pay for the project. While upgrades can clearly increase the overall value and enjoyment of your home, you’ll want to be careful not to put so much money into the project that you won’t see a return on your investment that’s acceptable to you. Try to avoid spending so much on the renovation that the typical added value it contributes to the home plus the added enjoyment you’ll get out of the upgrade(s) fail to justify the total price you’ll pay.
- Get multiple bids — Now that you’ve identified exactly what you need done and how much you’re willing to pay for it, it’s time to get a few quotes on completing the work. It’s wise to get estimates from at least three reputable local contractors (or even more) so that you can compare their offerings and their costs. To find suitable candidates, ask friends and family members for recommendations or perform online searches. And before reaching out to any candidate, it’s never a bad idea to check online reviews to ensure that each candidate you speak with meets your standards.
- Choose your contractor carefully — To find the right fit in a contractor, complete interviews with the candidates you’ve chosen, and don’t neglect to ask for and check their references. Be straightforward and clear about the scope of your project and your budget, as this will increase the likelihood that the contractor will warn you in advance of any potential added expenses, needs for project changes and/or scheduling delays. Be sure to discuss how both you and the contractor will handle any unanticipated issues and how they may impact the budget for your renovations.
- Consider your payment possibilities — How much money you’ve saved for your project and the total cost of the renovations will likely have big impacts on how you choose to pay for your upgrades. Especially for projects of a smaller scope, saving up for the work is often the best way to ensure that you have the funds available and can stay on budget. (And if the project isn’t especially urgent, any funds you place in a savings account can be earning interest while you’re making your plans.) Using a credit card to pay for smaller projects is another approach you may want to consider — especially if you can find one with a low or even 0% promotional APR and you can pay off all or most of the balance before a higher rate kicks in. A credit card that offers cash-back rewards or other attractive incentives might be another option worth considering, particularly if you have the funds available to quickly pay off the balance. And for larger projects, you may want to consider a personal loan – just be sure to meet with a loan officer to help you find the best loan option for your project and budget.
- Schedule your project smartly — When you schedule your home-renovation project can have impacts on the price you pay for it. Because some projects such as adding an outdoor deck or installing new windows are easier to perform during the warmer months, contractors tend to be in higher demand during the spring and summer — and therefore often raise their rates. For indoor projects that can be done in the fall and winter months, scheduling during this time can often result in more budget-friendly pricing.
- Consider performing some DIY work — In most cases, labor costs can account for more than 30% of the total renovation price. But homeowners with the skills needed to put in some “sweat equity” can often find ways to bring the price down. This can be achieved by doing some or all of the demolition work needed on the front end, putting in some painting work on the back end, or doing any of the needed work in between.
Proudly serving South Carolina since 1933, Arthur State Bank offers accounts and services to meet a variety of financial needs. To help you achieve all your financial goals, the bank offers in-person service as well as a range of convenient digital solutions. To learn how Arthur State Bank can help you with banking needs ranging from checking and savings to retirement accounts, mortgages, other personal loans and more, visit arthurstatebank.com.
