Developing a Realistic Budget

The Operative Word is �REAL�

Of course, you want everything to be perfect now. Who doesn�t? But how much "should" you spend? The answer varies by circumstance. It also depends on how much you want to invest into the new home. If you�re planning on staying a while, by all means � spend! If, on the other hand, you are planning on using your current home as a starter house and anticipate moving within five years to a larger place, take time to reconsider the budget. A trimmed budget that�s targeted to high value resale changes would be the best option.

Put on Your Magnifying Glasses

The best thing to do when budgeting is to keep the cost of your remodeling project in perspective. Look at your monthly debt and your monthly assets again with the new bills in place. Then consider how much you can reasonably afford to take on for remodeling. You may want to wait a few months until you really have a handle on your new finances.

Magic Number Minus 20%

Once you determine how much you can afford to spend on a remodeling job, decrease that amount by 10-20%. This money should be put in a reserve account to cover any change orders or incidental charges accrued along the way, which will prevent a frantic scramble for additional funds at the end of a project.

Once you have the lower budget figure. Stick to it. Keep change orders to a minimum and recognize that phrases like, ". . . while you are _____, could you just ______," can quickly destroy a budget. Any work not specified in the original contract will have a new and additional cost attached to it. Contractors find that "whileyas" as they are called in the industry, can represent up to 10% of their annual volume. Stick to your plan like glue. And be patient. You may need to stagger the work over time and deal with the waiting period to get your perfect home.

Remember that your choice in products will determine the cost of the project. There are many different levels of product quality and many different price ranges. Talk to your Contractor about various options to meet your overall goal.

Project cost will vary depending on your location, the size of the room and what features or options you choose. But your best bet for establishing and meeting a realistic budget is to hire a professional remodeling Contractor. It all comes back to money. You want to remodel your home, but not spend your children�s college fund to do it.

TERMS TO KNOW

Budget

A detailed list of anticipated income and expenses. A budget can provide guidelines for managing future investments and expenses.

POP QUIZ

True or False

1. Waiting to see exactly how much my bills are for the new home is a good idea before taking on new debt and expense for remodeling.
   True False
2. Once I have my budget determined, I can call the remodeler and start spending.
   True False
3. I don�t need a reserve fund if the project has a budget.
   True False
4. Adding things to my contract after it is signed won�t affect my overall budget.
   True False

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