3 Ways to Manage Your Budget During Your Renovation

Hi guys! Naomi Findlay here, your Rapid Renovation expert.

Recently I talked about how to create a renovation timeline and stick to it. Now I want to talk about the money side of things.

If you’re already at the “pick up the tools and go” stage, you would have a pretty detailed budget in place already. If you don’t have a budget set out, please don’t jump the gun and start knocking down walls. Instead, take a look at my previous post on four ways to work out your renovation costs first.

Now that you have your budget all worked out, how are you going to filter in any changes? What if it turns out you need to replace the old piping because it is rusting? Or perhaps you decide to extend the splashback to the ceiling – where will the money come from and how will it fit in with the rest of your budget?

All of these are questions you might come across as you get further and further into your renovating project.

So you have to know how to stick to your budget, but be flexible at the same time.

Your budget is the core to all of your renovating goals. 

The amount of money you have to play with will determine what sort of renovation you will be able to do. If you overstretch your budget you will end up eating into your end profits.

On the other hand, if you under stretch it, it will be end up like a pizza with just one topping; it may have had potential, but it fell short when what the customer really wanted was a meat lovers with extra sauce.

If it turns out your kitchen splashback tiles are going to cost $1000 more than you originally set aside, what are you going to do? Are you going to replace them with a cheaper alternative? Or are you just going to spend the extra cash and bite the bullet?

Well, neither. I mean, you could choose a cheaper tile, as long as it doesn’t affect your final look and feel of the space. Remember, if you’re aiming for a target market that’s looking for luxury, you need to provide that luxury in your renovation. So, you can’t just swap out those designer tiles with some cheap Chinese knock-offs. People will be able to tell, and your profits will suffer.

So then, going with the original tiles you had in mind will cost you a little more than you planned, yes. But it will also mean that you still maintain that space that will connect with your potential buyers. What you need to figure out then, is where else in your budget you can subtract that $1000 so you’re not left out of pocket. If you alter your overall budget now, you will simply be removing those precious profits.

It’s about finding that middle ground.

That’s why I have three main steps to keeping your budget under wraps while renovating.

Break your costs down.

The first of these is about breaking down your costs into categories. It can be easy to get overwhelmed by a whole bunch of numbers, especially when they have a few zeros at the end of them. It can also be easy to lose yourself in those numbers and not know if one part of the renovation is climbing over its money limit.

My advice would be to break down your big jobs into steps and work out the budget for each of these.

Don’t just have the category “demolition”, with a huge, intimidating number next to it. Think about all of the steps that are involved in this demolition. How much will it cost for your tradies time to knock down the wall? How much will it cost for the skip bin and removal of the rubbish? What’s the cost for cleaning the place up? Is there any asbestos in the walls that needs to be removed and how much is that going to be?

Working out all of the little steps will help you get a better gauge on how you are tracking as the renovation works progress. This way you can also steer the budget back on course if you see it starting to side-track.

Always have a buffer.

The second step is to always have a bit of extra back up cash. I’ve mentioned this one before, but it really is important to remember.

It’s like freezing soup; if you pour too much into the jar, you will end up with an exploded container and a nice mess in the freezer. Don’t make the mistake of squeezing in every renovation you can think of out of your budget without leaving any breathing room.

Sometimes, things will happen that are just beyond your control. No matter how much preparation you did, how many hours you spent going over every detail, not everything goes according to plan. Maybe the recent rain made the roof leak and you’ve been left with some water damage. Or perhaps those tree roots from the Jacaranda tree crept a lot deeper into the piping than originally thought.

You can’t just turn a blind eye to them, just because they weren’t in your jotted down in your original budget. And sometimes you won’t be able to just pinch those couple of thousand dollars from another section of your budget without affecting the final space.

When unexpected things like these happen, that’s when your buffer cash comes into play.

Double check your budget.

The third step is all about your monitoring skills. Unfortunately, your budget is not a slow cooker; it’s not something you can just set and forget. Just because you have it written down on paper, that doesn’t mean it will pan out like that in real life – although you hope it will!

Like a baby, it needs constant care and attention.

It’s all well and good to have a budget but now you need to stick to it. What is happening on site this week? Are you running on track? Did the demolition work stick to budget? Are you taking into account the mortgage repayments? Did you have to pay council fees this week?

The best way to keep on top of all of these costs is to check them at least twice a week. Because you are renovating for wealth, you are on a tight schedule; and that means a lot can happen in a week.

So, use a simple spreadsheet – something like Excel – to jot down and keep track of the expenses. Then, compare them against your original budget to see if they match. If you get into a habit of doing this, you will be more likely to stay on course and finish your renovations on time AND on budget. And all of those are essential ingredients in getting your profits at the end of the renovation.