Serious topic for a Tuesday, I know… but this is another popular reader request and a necessary discussion that comes with renovating. I hate talking about numbers, I hate having a budget (don’t we all?), and excel sheets make my head spin. That’s my honest truth. Sometimes I dream of designing our entire house all at once and hiring a contractor to make that dream a reality, so it happens more quickly and we immediately can enjoy it in its post renovated state. However, that’s not in our budget, that’s not realistic for most, and to be honest- we really like tackling projects not only because of the savings, but because of the fulfillment that comes along with creating our dream home together. Regardless of how you tackle projects or renovate, budgeting is key in making your dreams a reality. For every single project we tackle, we create a plan and budget accordingly… and when I say “we” I really mean Emmett. We won’t even start a project until we have the funds. It’s an important part of renovating or remodeling and being financially responsible throughout the process. I’m actually turning this post over to my money minded, accountant husband. He’s the smartest when it comes to this sort of thing, and is always the brains behind our home finances. I give him 100% of the credit for being super smart with our money (and keeping my home spending in check, haha). Click through for his 10 best tips! They’re really good.
Hi everyone! Emmett here. As you’ve might’ve guessed, Sarah hates numbers, math, and budgeting, so that means I’m in charge of all of our finances, accounts, and am responsible for creating our project budgets. While I wish I could immediately say yes to all of the elaborate projects & design plans Sarah dreams up (she’s been begging for a pool since we moved in), I know it is in our best interest to manage our money wisely and plan accordingly for our home goals. That takes time and hard work! Here are 10 of my best tips for budgeting and making your dollars work harder for your home!
#1: Don’t spend money you don’t have.
This seems self explanatory- renovate within your means. This doesn’t mean you can’t take out a HELOC (home equity line of credit) or refinance your home, but it does mean you should do it with your budget in mind. Remember- this is spending the equity you have in your home and is considered debt. Make sure you can afford it and it’s a smart investment. Borrow a reasonable amount and renovate within your means. Don’t kid yourself when you borrow money… that still means you can’t technically afford it. I know that sounds harsh, but we have to be honest with ourselves. The optimal choice is always saving the money, and paying for the project with the money you’ve saved.
#2: Get an estimate and plan ahead.
Get an estimate and work toward that goal. Figure out how much your project is going to cost, and plan ahead. My rule is actually to get three or more estimates, pricing out a project with different contractors. Check out this post on how to find, hire, and manage reliable contractors.
#3: To work in phases or not?
Working in phases can be beneficial, or it can end up costing you more. Research, then decide what best fits your budget and plan! Tackling a project in phases can make larger projects more attainable. It allows for progress much more quickly. Always ask your contractor if they’re willing to work in that manner… completing a project in phases, but be sure to have them price it out both ways. For example, a contractor may give you a price break for running electrical in your entire home, rather than doing it room by room. Once you have estimates, you can make an informed decision and proceed.
#4: Smart savings.
Saving is the name of the game. We already touched on this, but saving is the best way to pay for a project. While saving, remember that money in a standard savings account is actually losing money due to inflation. If you’re saving money, you should be investing. Not all investments have to be risky and longterm. For example, moving your money from your conventional savings account at your local bank to a high interest savings account online can gain you 1-3% in earned interest, with essentially the same amount of safety and liquidity. Or if you’re saving for a 2-5 year project, you could invest in certificates of deposit (CDs) and bonds. These are historically safe with modest returns. However, it is better than having your money sit in a standard savings account. Always make your money work for you.
#5: Take the DIY route… if it makes sense.
As you already know, we DIY 95% of our home projects. It does take more time, but in the end- we end up saving a lot in labor costs. If you’re willing to put in a little elbow grease, you can use the money you would’ve spent on labor elsewhere. On the other end of the spectrum, knowing when to hire the pros can also end up saving you money!
#6: Collect points.
Use credit card points to your advantage. When it comes time to start on your project, buy tools, building materials, furnishings, and decor on your credit card, redeem the points, then pay it off in full. We live for points in our household- every single purchase we make is on a credit card. The amount of Lowe’s gift cards we’ve cashed in thanks to credit card points is a staggering amount. Points can really add up quickly and make your budget go further. You’d be surprised how many points you can get from paying for a $5k appliance or $20k worth of kitchen cabinetry. It’s significant! Also ask contractors if they will accept credit card payments, but do be aware of the processing fee- ask if they charge one and do the math.
#7: Save on big purchases.
Check out Sarah’s post on 10 ways to save money on major home buys. From purchasing floor models and remnants to taking the DIY route, we do a lot of these things to save money while still creating a high-end look at home. These little things add up and create wiggle room in our budget.
#8: Consider your return on investment.
Renovate with your home and neighborhood in mind- always keep ROI on your brain. It’s a bad investment to over renovate… you’ll never recoup that money when it comes time to sell. Here are 10 home updates to skip based on ROI. You can also find 10 home updates that actually pay off and add value in this post.
#9: Create padding in the budget.
Although there is no formula for expecting the unexpected, save more than your original estimate. For example, if your formal bid is $10k, save a contingency amount… maybe shoot for $12k? If things don’t go as planned, this padding will be very helpful! If things do go as planned, you can use that extra money for upgrades, or roll it into another home project you’d like to tackle in the future.
#10: Be conscious of the economy.
Right now is actually a terrible time to build or renovate solely based on the cost of supplies. Most people don’t know how much a 2×4 piece of lumbar typically costs, but building materials are currently up over 40%. That’s a significant amount. Building supplies fluctuate just like gas prices. If you aren’t sure how much things normally cost, it’s a good thing to research. It may be worth putting your project on hold for six months to a year because it could save you thousands of dollars, based on fluctuating costs. If you have wiggle room in your timeline, it may be smart to wait.
Sarah here again. Big thanks to Emmett for sharing his tips! I’ll admit, I’m not the most patient person when it comes to waiting, saving, and planning, but I’m so appreciative to have Emmett handling the (boring-to-me) financial side of our projects. It makes my life easier and thanks to him, we don’t have a massive pile of debt. I wish I had his analytical math brain, but we make a good team. I hope this post was helpful for you too! Feel free to drop questions in the comment section for Emmett and he’ll answer them later tonight.
PeggiApril 27, 2021 at 5:28 am
Budget. Such a buzzkill. But so necessary! Your tips are smart and clearly stated. (No sugarcoating! “Don’t kid yourself…you technically can’t afford it.” 🤣) One that I always struggle with is getting multiple estimates. Because of our location, we have fewer trades locally, and getting callbacks can seem impossible! My strategy has been to focus on finding satisfied referrals and hope that includes both workmanship and cost. Also, I guess I need to investigate credit card points; I honestly always considered them a gimmick. Discussing finances can be awkward, but why should it be? Budgets are a reality. Knowledge just makes more confident, informed decisions. Plus, once money talk is out of the way, you can relax and get to the fun part! Happy Tuesday, Gibsons!
SarahApril 27, 2021 at 9:12 am
Such a buzzkill! The amount of times Emmett says to me, “We can’t afford it!” is laughable. To which I roll my eyes and beg him to magically change the numbers in our bank account- like a child. Haha! Joking, kind of. He definitely can come off as harsh with the budget, but I’m honestly thankful he keeps everything in check for us, hopefully setting us up for financial freedom in our future. Oof, numbers… definitely the worst part of renovating and updating our home. You make such a great point on location and accessibility to the trade and supplies! Living in a remote spot definitely makes things more difficult. I think your strategy is a good one though! We LIVE for credit card points- Emmett is seriously the king of points (and researching points). We use certain cards for certain things (based on the points they provide at any given month). We haven’t paid for flights in years… because we always have enough points to cover our air travel. I don’t have the time and energy to do the research, but Emmett loves that sort of thing and just instructs me what our plan is when purchasing things each season or for each project. They really are a game changer. You just have to remember to set aside the money to fully pay off the card each month, so you don’t get charged interest. We use cards for everything- gas, groceries, home projects, anything & everything. My favorite part of a renovation is graduating from the money talk phase and moving onto the fun stuff! You’re definitely accurate with that statement. Haha! Happy Tuesday, Peggi!
ElizabethApril 27, 2021 at 8:01 am
Emmett, This is such a great and helpful post! We are in the beginning of reaching out to contractors for a major remodel, so I really appreciate the posts y’all have done recently related to this. I had heard that not only had the cost of supplies skyrocketed, but availability of supplies was also holding up jobs for weeks (which I have heard also can add to costs). You mention you thought it might be better in six months to a year. Is that because so much of the remodeling happening now will be finished? We are hoping to start demo in 5-6 months, so I’m just trying to get a better understanding of whether things will be better by then!
Thanks so much! Elizabeth
SarahApril 27, 2021 at 8:51 am
That’s so exciting, Elizabeth! Yes- that’s an excellent point about the lead-times holding up jobs as well, which can definitely increase your estimated budget. I’m going to let Emmett answer your question about timing, although if I had to guess his answer- I’d say there is no accurate prediction as to when the supply & demand (lead-times), and pricing on materials will level out. It may not be less expensive in 6 months to a year. I’ll be interested to hear his economic predictions on this one :)
Emmett GibsonApril 27, 2021 at 4:37 pm
Elizabeth- You are absolutely right, leadtimes are also a factor. When supply goes down, price goes up! 6-12 months is just an example. Obviously with Covid, the Evergreen in the Suez Canal, etc. there are many first time scenarios we are facing. It is also hard to predict that even when supply has leveled out, will suppliers and manufacturers immediately drop their pricing back down or maintain those prices for months later. My only suggestion is be diligent in shopping prices and plan as far ahead as possible for securing materials. Best of luck!
Korin BApril 27, 2021 at 8:14 am
Awesome tips. Thank you for being reasonable and realistic and sometimes harsh.
Question though, I read both of the ROI posts and one says YES outdoor living spaces the other one says NO sunrooms/porches. I would love a post clarifying what your research says about what kind of outdoor spaces and how much to spend on these.
Thank you so much for these excellent and informative posts.
SarahApril 27, 2021 at 8:47 am
Hi Korin! I’m happy it was helpful. I can definitely clarify those ROI questions for you! Based on my research and in chatting with real estate friends, certain outdoor investments can be good… like sprucing up your patio, porch (even adding a porch or patio), cleaning up landscaping (curb appeal), creating functional living space- like an outdoor dining area or grilling station, seating around a fire pit, etc. These things are awesome selling points- especially when the interior square footage is lacking, or you live in a smaller home. Helping future buyers see the extended outdoor living space as usable square footage is always a good thing. Onto the outdoor things I listed in my “Things to Skip for ROI” post… garage, carport, & sunroom additions or expansions. When you’re adding or building onto your home, these are all areas that don’t yield a great return. It will cost more than you’ll get out of it. If you already have a sunroom, I think that’s a nice opportunity to style it and show the potential of how it can be used- I’m just saying, it probably isn’t a wise idea to add a space like that onto your home. Other bad outdoor items (based on ROI)- playgrounds, trampolines, pools, spas, sport courts, etc. In terms of how much to spend, that’s totally dependent on your home and neighborhood. You might find this post helpful! I talk about ways to add value to your home and how to think in terms of resale, if you’re not in your forever home.
LaurenApril 27, 2021 at 8:34 am
Happy Tuesday Emmett and Sarah! Awesome tips here! We’re working in phases with this house because we’re lucky enough not to have to tackle major issues inside the walls, or make changes to the flow and function. Jeff and I are very similar to you and Sarah in that we diy 90% of the projects we tackle. We typically use a CD for savings, but in the past few years haven’t seen much gain from the ones we have. I’ve never heard of an online savings account-can you explain more about that?
I had never thought about using credit card points to assist with a project-that’s so smart! If I’m understanding it correctly, you’re saying make the big purchases on your credit card, cash in the points for a gift card, and use that gift card to make other purchases for the project? I’m sitting here thinking “duh, why haven’t we done that?” We’ve paid careful attention to the homes in our neighborhood that have been selling in the last few years. We’re stalker status-attending open houses so we can explore the different layouts in the neighborhood, and what’s actually been done to update the homes, all the way to looking up the previous and current listing to see what has changed since the last purchase. It’s given us an interesting perspective- we have two groups within our neighborhood: the bandaid diy’ers and the over renovators. My question about ROI coincides with that- does/should that change our approach to renovating our home? We will never fall into the bandaid diy category, but I also don’t want to under-renovate. My brain tells me to stick with what I know about ROI and not deviate from that, because in my mind that’s where high-end and budget friendly finishes do seem to work hand in hand. I’m not sure if that makes sense, but you’d be amazed at how much some of these bandaid properties are selling for here in California! And the over renovated-far worse! It almost feels like an over inflation of the true values of the homes. It’s also a major eye opener as to how many people truly can’t see what their eyes are really looking at. Interesting point about paying attention to the fluctuation in prices of materials and holding off on major renovations if possible! It makes sense but I’ve never thought to think of that. Thank you for rounding up your tips for us Emmett, and for tackling our questions! I hope you’ve had a great start to the week!
SarahApril 27, 2021 at 4:18 pm
Happy Tuesday, Lauren! I love that you and Jeff take things in phases and tackle projects yourselves. Sounds familiar ;) It’s so rewarding though! I’m going to let Emmett take your question about the online account because he’s the smart one. I do know we’ve used Ally bank in the past and there are some good incentives there! As for points, YES- exactly. We often redeem them for gift cards, skymiles, etc. Better yet- cash in your points for a direct deposit (whatever the value of your points is goes into your bank account), then make the purchase on your credit card, pay it off with the money that came from your points, and in the end- you’ll get even more points. You two are so smart for scouting the neighborhood and going to the open houses. I like to go to open houses because they’re fun, too! I think you answered your own question. We always renovate with ROI in mind, knowing this probably isn’t our forever home, but we definitely don’t want to fall into the bandaid DIY category, and over renovating isn’t great either because it essentially means we made a bad investment and will lose money on our home when it comes time to sell. We try to mix high and low (without the low looking low), and we know that our house certainly isn’t the nicest in our neighborhood. It would be difficult to over renovate here- especially given the crazy market. It sounds like the Utah market is just as insane as your California market. It’s really tough to find affordable housing right now. Most homes are getting multiple offers well above asking price and are sold before they’re even officially listed on the MLS site. It’s bananas!! I feel for those house hunting right now. I hope you had a happy Tuesday. We had rain here AGAIN. I can’t complain because we need it, but I’m ready for a peek of sunshine soon :) xox
Emmett GibsonApril 27, 2021 at 4:46 pm
Hi Lauren! I will give the short answer to your questions, but feel free to ask for more explanation!
1.) CD’s typically are more advantageous when interest rates are higher, and Bonds might be the better option when rates are low.
2.) Gone are the days of conventional brick & mortar shops- including banks. Check out somewhere like Ally.com (my personal choice). They save money by not having physical sites (and im sure operational savings as well) and offer higher savings rates. Still way below inflation, but you can have your money transferred to your regular checking account within 5 days- so a great option if you need quick access.
3.) We put every purchase we make on our Delta Amex. We use the skymiles to buy Delta flights (i am not a fan of using other banks points to purchase the basic economy flights). We have a couple other cards that offer better % points for certain categories (5% back for fuel, or even at Lowe’s on some months). If those conditions apply we use those cards and then redeem the points directly for statement credits. ALWAYS PAY YOUR CARDS OFF THOUGH!
Hope that helps!
Danna FApril 27, 2021 at 9:24 am
I have the exact same feelings about budgets and spreadsheets Sarah. I want to just build the house with all the rooms and appliances without limits…dang those limits. Thank goodness for level headed, mathematical minded husbands or else we would be in forever debt.
Could you talk more about #6. We have not had a credit card with points for some time so I would love to hear what you use and how you go about collecting points. I know there’s many cards out there but I am really interested in which one has worked best for you. Also, with us building a home in the next year or 2, this would really be useful.
#10 is very real for us right now due to cost of supplies. We are trying to find land and that is presenting challenges even in Texas (crazy)! We have decided to wait a year or 18 months till lumbar, concrete, etc go down in price to build.
So many good tips throughout this post from you both. Thank you.
SarahApril 27, 2021 at 4:07 pm
Ugh, yes… spreadsheets are the worst. Your attitude = my attitude, Danna. Haha! I just want to do all the pretty things and not worry about the budget! Definitely thankful for mathematical minded husbands who reel us in. I’m happy to talk more about #6, and I’ll let Emmett comment as well (because he’s the smart one when it comes to finances). I’m serious when I say we make every single purchase with a credit card. Those point add up so quickly- especially when you’re making big home purchases (building materials, tile, appliances, cabinetry, furniture, whatever!). We have multiple cards that have different point advantages and we use them for different things at different times. It sounds confusing, but it’s really not once you get into the habit. I’ll share some examples! We have a few different Chase credit cards- the Sapphire and the Business ink (which I use for my business purchases). With the Sapphire (and their Freedom card as well), each month they offer different incentives. You may earn double points on fuel if you use the Sapphire card, while you may earn more points on entertainment purchases (movies, restaurants, shopping, etc) if you use the Freedom. Each month Emmett checks the incentives and instructs me on which card to use based on the points, so we’re maximizing our rewards. You’ll also get points for signing up for the cards, which can influence which card you go with. Another example- we also use the Delta Skymiles Amex card, and just for signing up you get two free domestic flights each year (maybe it has changed since we signed up, but there are always different incentives). Sometimes it’s worth it to use that card for other incentives or purchases. We haven’t paid for flights in a long time thanks to points! You can turn your points back into cash (they’ll deposit money directly into your account), you can get a visa gift card that acts like cash, redeem points for other gift cards (like Lowe’s), book travel or experiences with them, etc. There are lots of options. I’d highly recommend purchasing with cards just for the points- especially as you build and furnish your new home (did you get your land?!). I think you’ve made a smart decision on planning to wait until material costs decrease. Keep an eye on it! You’ve got an exciting future ahead with your home, Danna! Hope you had a great day. xo
Danna FApril 29, 2021 at 10:40 am
Thanks Sarah for the tips on credit cards. I will be checking on these for sure.
Unfortunately, we got out bid on the land. It was a beautiful piece of property and it still stings knowing that we won’t be able to live there. We aren’t going to let this keep us down. There is a place that is out there for us, we just have to have faith. We are going back out Saturday to look at 2. Wish us luck!
SarahMay 3, 2021 at 6:47 pm
It sounds like holding out faith worked well in the long run, Danna! :) YAY!!
Melissa DApril 27, 2021 at 10:34 am
Oh boy… budgets and ROI considerations are the bane of my existence these days. I love Emmett’s bluntness when it comes to budgeting for what you can afford – I need more of that in my life! I’m also curious to hear his thoughts/predictions on the cost and supply issues of building supplies these days. Is there any signs to look for that prices will drop in the next 6-12 months?
Here’s my current situation: living in a house built in 1895 situated in small town Mississippi where home prices/values are all over the place. We knew going into this home that there was a lot of “invisible” updates needed – roof, electrical, plumbing, HVAC, etc. How do you balance the cost of these updates with the overall budget knowing that you won’t get back the money that you put into those kind of updates? Along those same lines – if you’re renovating in phases, do you keep an overall home value/budget in mind when creating the budget for each project? And lastly, if you’re working on your forever/dream home… how much wiggle room would you give yourself on doing what makes you happy over what gives the best ROI?
SarahApril 27, 2021 at 3:51 pm
I feel you, Melissa. I’ve been trying to figure out how to make a pool happen at our house and the number crunching isn’t going well. Haha! Emmett definitely knows his stuff and keeps me in check, which I need. I’m thankful, despite the fact sometimes I want to punch him or spend money we don’t have. Lol! He’s a big picture kind of guy. When he gets home from work, I’ll see if he can hop on and share his predictions! If I had to guess- I don’t think there are any indications that prices will drop in the next 6-12 months, but again- he’s much more intelligent in this area.
Amazing questions! I’ll do my best to answer… we’re in the same boat with “invisible updates”. So far we’ve already had to replace hot water heaters, water softeners, the roof, and tons of plumbing & electrical. It adds up quickly and as you know, those items suck up the budget but are necessary. If you’ve already put into your home what you think you’d be able to get out, you should focus on budget-friendly cosmetic updates instead of large scale renovations. Sure, a new kitchen is a great selling point and much more fun than a new roof, but if homes in your area are only comping for so much- you’re not going to recoup that kitchen cost. There are definitely anomalies, but we definitely keep tabs on the value of our home each year. In this market, it has been rapidly increasing, which is great news for us and our renovation plans. Emmett keeps an excel spreadsheet of the value of our home, the money we’ve put into it so far, and the budget we have yet to spend, but have plans to use for future renovations. This helps us keep track since we do renovate slowly, in phases. It’s also fun to look back and see how much we paid for our home, how much we put into it so far, and what the current value is. It’s rewarding! If you’re working on your forever home, I think you should have ALL the wiggle room! Obviously in Emmett’s words, “don’t spend money you don’t have”, but I wouldn’t worry about resale value, ROI, etc. My philosophy may be a bit morbid when it comes to a “forever home”, but you can’t take anything with you when you die, so you might as well spend your money on things that make you happy in your forever home. I’m not sure if that helps? Ha!
Melissa DApril 28, 2021 at 6:39 am
Thanks Sarah, that actually does help! At least it helps me feel better about accepting that we’ll probably never get out of this “forever house what we put into it. Have you ever seen that movie The Money Pit? I made my husband watch it when we bought our house, it’s so funny but also hits a little close to home sometimes! Ha.
I feel for both you and Emmett on the finance stuff – I’m the money/spreadsheet person in my family, where my husband is definitely more a dreamer. It’s just a lot less fun when I have to tell MYSELF no! I do like the idea of keeping up with your home’s value year to year – I’ve already got the budget and reno plans set up in an excel spreadsheet, maybe I should add that one too.
SarahApril 28, 2021 at 3:21 pm
Yes- I can also relate to Money Pit, haha!! I think if you’re planning to stay forever, you should do whatever you want- a dream home that makes you happy. It’s always nice to have two different brains that complement each other. I can imagine it’s tough to tell yourself no though and be the responsible one. Ha!
Jennifer LauraApril 27, 2021 at 11:28 am
Great advice! I am SO bad with money so this is all amazing advice!! I am currently setting aside a small portion each month to tackle projects and am definitely doing more small scale things right now- room makeovers and cosmetic changes, saving the big wall busting renovations for down the road!!
SarahApril 27, 2021 at 3:35 pm
Me too, Jennifer! Way to go on setting aside money each month for projects- that will make a huge difference- for both projects large & small. You’re doing a great job!! :)
Anne HApril 27, 2021 at 2:41 pm
Excellent, excellent advice, E! Thanks so much for sharing. B and I all about the cc points, too, although we use ours exclusively for travel and not to convert into gift cards like Lowe’s, but that’s a fantastic idea! The ROI post reminders were especially helpful, too, although I have to agree w/ Sarah on the pool one – it may not add ROI, but what it could add in happiness can be more than worth it. Having grown up with an in ground pool, we were able to have friends over for pool parties (everyone wants to be your friend if you have a pool, or a boat 🤣) and our whole family used it almost every day in season whether for pleasure, exercise, or just cooling off in the hot, humid VA summer’s! So count me in as #teampool! 😄 Happy Tuesday, Gibsons! 💕
SarahApril 27, 2021 at 3:34 pm
Yes! We use points for all of our flights, too. It’s so nice! We’re all about the Delta Skymiles Amex. You have no idea how badly I want a pool, Anne! Haha! I know it’s going to be blistering here this summer and I honestly called some local companies last month to check lead times and they’re all booking into fall of 2022!! I couldn’t believe it. Not that we can afford it right now anyway, but whew… I guess that gives us some time to start saving. I so want to be the “fun house with the pool” where friends & family show up to swim. I think I have Emmett convinced, but it’s a big investment. First we’d have to pour a retaining wall since we live on the side of a mountain, and Emmett also priced that out last month- $30k. Yikes. I might need to find friends who have a pool I can borrow this summer. Lol! Hope you’re having a good week! xo