San Diego Union-Tribune (Sunday)
Budgeting for home improvement
Homeowners need to know how much they can spend and then stick to a budget
When we’re at the grocer y store, we carefully select the products that go into our shopping car t and often remove items that don’t fit the budget once we’re in the checkout line. The same is true at the clothing store — we check the price tag and spend time browsing through the racks to find the best deal.
Unfor tunately, most of us don’t devote the same level of scrutiny to a remodeling project that can cost tens of thousands more than the aforementioned purchases. For proof, consider the results of a recent study by Modernize, which found that nearly four in five homeowners (79 percent) fail to create a budget for their home improvement project. That number is up from 75 percent tallied last year. Among the other findings, only approximately 30 percent use online tools and cost calculators, and 53 percent spend merely one to five hours researching their project prior to submitting a lead.
Charles Thomas, founder and president of Intrepid Eagle Finance in Clover, South Carolina, says there are multiple reasons why plenty of homeowners don’t budget properly for their home upgrades.
“Most folks who take care of their own finances have never been taught how to do this. This includes a normal budget for some, but who learned how to make a budget for a home improvement project while they were in school? Almost no one,” he said. “Also, for Americans who work with a financial advisor, almost none of these exper ts are willing to help their clients with this kind of budgeting.”
Todd Nelson, senior vice president of Strategic Par tnerships for San Diego-based Lightstream, said plenty of people love to fantasize about home improvements and the finished results, but few take the time to understand the complexities and costs that can go into remodeling.
“With any renovation, it’s impor tant to know how much you have available to spend. You need to determine your budget and
stick to it,” Nelson recommended. “With a solid budget in place, you can prioritize your project’s scope, make informed choices about how much you have available for construction labor, products and services, and determine how to fund the project in the most economically sensible way.”
Careful budgeting is also crucial to prevent your hear t from superseding your head.
“You don’t want to let your emotions cause the investment to become unmanageable afterward. For most, remodeling allows for a fresh star t. However, when we purchase conveniences, we often allow our hear ts to lead and our wallets to follow. This can lead to post-project stress,” cautioned Christopher Wittmann, senior sales representative and remodeler with Callen Construction, Inc., in Muskego, Wisconsin.
To improve your odds of budgeting accurately and ensuring that a home project doesn’t exceed what you can afford, follow these tips:
Build into your budget a 5 percent to 10 percent buf fer for unexpected expenses.
Request at least three written estimates from dif ferent contractors and manufacturers and compare them to determine which best fits your budget. “Be sure all costs for permits, equipment, insurance, and fees are included in the estimates,” Nelson said.
Plan carefully for how you’ll pay for the project. “Savings might seem like the ideal funding method, but don’t spend funds that are earmarked for other impor tant purposes,” Nelson advised. “Also, check the interest rates and fees for any financing you plan to use, whether that’s from a loan or credit card. If you choose the latter, pay it of f on a timely basis, so there are no accrued penalties.”
Consider choosing a contractor that will be responsible for all the work, including design and construction. “Work with a company that takes responsibility for all the processes involved, with no finger-pointing to worry about,” suggested Nancy Dalton, president of Baywolf Dalton, Inc. in Seattle.
Ask thorough questions of your contractor. “Inquire who their wholesale suppliers are, lumber yards, door suppliers, cabinetr y vendors, tile distributors, etc.,” Dalton added. “Ideally, they’re working with good wholesale suppliers who sell to them at a discount and usually provide better products.”