How to budget for a home remodel project

Household 3 min read

I was so excited when my husband and I got the keys to our very first home. Finally, we were homeowners and it felt so good! But then five minutes later, I couldn’t help but make a mental note of all of the things we needed to fix, change or upgrade.

The walls needed to be re-painted, the floors re-carpeted, the lighting fixtures replaced with recessed lights, and those were just the small things. After taking a good look at our full bathroom and powder room, I knew both needed a major update. Then there was the kitchen, with vinyl countertops that had permanent stains on them and appliances that were just begging to be replaced by newer, stainless steel models.

After drawing up my home remodel wish list, I was quickly reminded that all of these renovations have a cost associated with them, and being new homeowners, we were definitely living that frugal life.

So, how can one budget for a home remodel and not go broke by getting too carried away?

Answer truthfully why you want to remodel in the first place

Before hopping into the car to head to the home improvement store, you need to answer this question first. And if your answer is “Because I hate how it looks,” then just know that remodeling for cosmetic reasons is a luxury. But hey, if you have a stash of cash lying around, go ahead! For anyone also living that frugal life, let’s get practical.

If your home needs some major TLC, then you need to be strategic with how you plan out your home renovations. That’s the only way you’ll be able to update your home and not go into major debt.

Write down everything you want to remodel and prioritize

Make your own remodel wish list, then number each project in sequence of priority. So, the first item on your list should be something that is broken, is severely devaluing your home, or is making your life a living hell.

For me, it was our home’s ceiling light fixtures. They were old, not very bright, and there weren’t any fixtures in our living room. Because seeing in the dark is a big priority in our life, we put recessed-light installation at the top of our list.

Ballpark your costs

Knowing the sequence you need to attack each project in, it’s now time to find out the general costs to get them done. This would include looking at home renovation sites and even taking a few books out from the library to educate yourself about potential costs.

You can also use this rule of thumb to make your calculations: never spend more than the value of the room percentage of your home’s overall value. Meaning, if you bought your home for $400,000 and you want to redo your bathroom, which makes up 5 percent of your overall home’s value, don’t spend more than $20,000 on the remodel.

This will not only give you an idea of what your budget will look like, but it might even make you shuffle your renovation sequence a bit so you can do the more affordable projects first.

Get quotes from different contractors

Once you have your ballpark numbers in hand, it’s time to get some estimates. Contact at least three reputable contractors and ask for quotes. This will help you fine tune your budget. Also, don’t forget to add 20 percent to the quotes they give you as a contingency, because projects often go over your original budget.

Decide whether you want to save up or borrow

A lot of people believe that getting a loan or line of credit for renovations is considered “good debt,” but at the end of the day debt is still debt. By borrowing for your renovations, you’ll need to make sure you can afford the extra interest payments. This may make sense if you know the renovations will increase the value of your home long term and you’ve already factored those interest payments into your budget. If not, it’s best to just be patient, save up, and then do the renovations when you can pay cash.

That’s a big reason why the only project my husband and I have been able to get done in our home is those recessed lights. We saved up our money over the course of a year to get that done, now we’re saving up to tackle the next item on our list, our downstairs bathroom.

Sure, we would love to get everything done all at once so we can have that perfect home we’ve always dreamed of. But I also know that I sleep more soundly at night knowing that we don’t have any debt to pay off, and no one but us cares that our powder room has looked like it’s under construction for over a year now.

Consider homeowners insurance from Progressive

A home renovation is a big endeavor, but you can ensure that you’re home with stay protected with a homeowners policy from Progressive. To learn more about how you can bundle multiple products and save, click here.

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