How to Build A Budget for a Home Remodel Build
I know many people have negative feelings when it comes to the word budget. I will admit that I have had a love-hate relationship with it over the years. Once I changed my thoughts about a budget and what it can do for me, it was easier to embrace the concept of a budget. I am not going to lie, I still have moments where it is challenging for me to stick to my budget.
The beauty of a budget is I can make some changes to it so that it meets my needs. Many people see a budget as strict parameters that control everything they do. However, keep in mind, you control your budget. It is based on your wants and needs and can be as strict as you want it to be. I recommend when you build a budget, you do so with some flexibility in mind. Certainly, you want to have some budget goals, but they need to be reasonable and attainable.
How Do I Prioritize My Budget For a Remodel?
When you are working towards the best way to build a budget for your remodel, you need to prioritize what you want. In an effort to save money for your remodel, I will later explain how to create a budget and begin to cut spending in that budget. But first, we need to take a look at creating the actual budget for the items you need for the remodel. However, creating this budget is not much different from creating any other budget.
Write Down All of the Items You Need for the Remodel
Is it a whole house remodel, or just a room? That makes a difference in materials and labor. Are you doing this remodel yourself or paying someone else to do it? This also makes a difference in how much money you need to save upfront. If you are paying someone to do the remodel, you most likely need to have all the money saved before the work begins. If you are doing the remodel yourself, you can start the work before you have all the money saved and buy parts as you need them and have the money for them.
Prioritize the Items
Once you list out all of the items you need, you must prioritize the items. This way you can buy the items you need first. For example, if you are doing a kitchen remodel, you need to buy your light fixtures and wiring before you buy the paint for your walls and ceiling. You want to make sure you cut all the holes you need in the ceiling and the walls before you even consider painting them.
What Do You Really Want?
Before you sit down to build a budget for your home remodels, you must seriously consider what you want. You must create your must-have list and you are nice to have list. Going back to the kitchen remodel, perhaps it is a must-have that you get all new appliances for your kitchen, but it is only nice to have for the double oven. If you get to a place where you need to save money, you can opt for one oven instead of two.
Perhaps it is a wood floor that is important to you, so then you make sure you get the exact floor you want and budget for it. When you are putting together a budget for a remodel, it is key that you fully understand your wants. Once you do that, you can begin to put those items into categories and prioritize them.
Make Smart Choices
You may come to the conclusion that you cannot afford everything you want. That is when you have to make some hard choices. You are only able to do this once you understand your budget. If you do not have a good grasp of your budget, you may end up spending more money than you can afford to repay, or get halfway into the project and realize you have no more money. Neither of those is good positions.
What Is a Budget?
Let’s learn some basics now because you must understand what a budget is. As with everything, there is a simple answer and a much longer version. I like to give you both. The simple answer is a budget is understanding your income and your expenses and balancing the two. Now, the longer but not really complicated answer.
Calculate Your Budget
You write down all your income in one column. You should include all of your income, including child support, wages, interest payments, etc. You should add up all the expenses in that column to get a total. In a separate column, you write down all of your expenses. I mean all of them. Now is not the time to keep your expenses off the list. Just write down all of your expenses, do not worry about putting them into categories. Not yet, anyway.
Write them all down and add the entire column together. Once you add the column up, you have a total dollar figure of all your expenses. You then subtract your total expenses from your total income and hopefully, you have a positive number. If you do, you are spending less money than you earn. If you do not, then obviously you are spending more money than you earn. Your next course of action is to take a critical look at your spending and saving, but I will address those further in the article. So, keep on reading.
Why Do I Need One?
There are many reasons why you should build a budget for yourself.
Control Your Spending
The main reason is when you build a budget, it puts you in control of your money. When you do not know how much money you are earning, spending, and saving, you have no control over your money at all. It is either controlling you or completely out of control. Neither of those is a good option. When you create a budget, you position yourself so that you are in control.
Know Your Finances
When you create a budget, it also gives you knowledge about your finances. If you do not know how much money you have, how can you know how much you should be spending? I am willing to bet that once you write down the numbers, you will be shocked about how much money you are spending and where. If nothing else, a budget can open your eyes to all the money you are spending in places that you never realized. When you see it in front of you, that is the best way to regain control.
Fulfill Your Goals
I am sure there are goals you have for your life. Maybe a goal is to retire early or have enough money saved to consider retiring early. Maybe you have a goal to take an extensive and costly trip. Maybe your goal is to be debt-free. No matter what goal you have, you will not be able to achieve that goal if you do not have a plan. You need to put together a roadmap for how you plan to get there. Your budget is your roadmap. You can set milestones that are achievable so that you can feel a sense of accomplishment when you reach them.
Can I Really Be In Control?
Yes, you can be in control. I remember the days of feeling completely out of control with my money. I felt like I was always paying bills and never had any money left after that. It was overwhelming and I felt like I was defeated before I even started. That is when I learned to build a budget. I put myself in control. Now, hear me when I say this...it is not always easy. It does require some sacrifice and patience. I am not the most patient person in the world, so that part was hard for me.
I felt like I had to cut out all the items I wanted in order to save a little bit of money. I did make some drastic cuts and it was hard. It eventually began to pay off and I saw the bills being paid faster and money being saved. At that point, it began to feel worth it. Once I started paying off bills, I could save more money, and then I was able to adjust my budget. When you create a budget based upon your wants and set realistic but measurable goals for yourself, it is easier for you to reach those goals.
Are There Different Types Of Budgets?
If you are new to the budgeting lifestyle, you may not realize that there are many different types of budgets. This means that there are different ways to build a budget. The type of budget you choose depends on your needs. I really want to focus on just a few different budgets. Although to me these budgets are smaller parts of a bigger overall budget. That is why I want to focus on them. Then I can show you how the roll-up into one budget.
There are several parts to making a budget work for you. One part is cutting spending, while another is saving, while another is prioritizing and having the budget work for you. When you are new to budgeting, it is helpful to start in small easy steps that are achievable and give you quick results. Plus, if you follow these models and create a budget, you will also be able to set some money aside for an emergency fund, which is always a good idea.
Focus on a Specific Issue
The first budget type I want to talk about does just that. It focuses on fixing a specific problem. With this type of budget, you focus on something specific where you can cut spending. Once you have written down all your expenses, it is easy to see where you spend a lot of money. Many of us spend a significant amount of money eating out. This is a great place to start cutting. You can reduce the number of times you eat out per week and maintain that reduction. Once you do that in one area and become comfortable with it, you can begin doing that in other areas.
Plan for a Specific Thing
Another type of budget is one that allows you to plan, or save, for a specific item. You can begin this after you cut spending. The item you are saving for in this case is a home remodel. The key is to determine how much you need to save. You should also know how long you have to save money. If you know you want to begin your remodel in 6 months and complete it 6 months later, it gives you an indication of how much money you need to save per month.
Once you have done that, now you need to look critically at where you can cut spending. You have already reduced the number of times you eat out, but perhaps, you can reduce it even more. Did you include coffee shop visits in that reduction? What about those quick stops at a convenience store? They all add up and quickly. Are there other items on which you are spending money that you do not use? A gym membership, perhaps? Many of us are paying for a gym membership that we do not use. Now is the time to cancel it.
Budget for All Your Money at Once
The last type of budget I want to review with you is a more complete type of budget that does all of the items I mention above at one time. This is your whole budget all at once. This is not simple and it requires a complete change to all of your finances all at once. For some, this is the best way to do it...all at once. For others, they have a more challenging time with so many changes all at once, so they need to ease their way into it. This type of budget cuts down your spending in every area. In addition, it sets limits on each area of spending.
For example, you set a limit of $500 per month on food. This includes all food, such as what you buy at the grocery store and when you eat out. This budget takes time to create and you should take all the time you need to create it. You want to examine each area of spending carefully because this is what you are allowing yourself to spend. This is an extreme way to build a budget, but it has the greatest payoff. Once you see your savings increase and your bills decrease, it will all be worth it.
Can I Create a Budget With No Money?
I am sure this is going to be difficult for you to believe, but yes, you can create a budget with no money. Hopefully, if you have no money, that also means you have no real bills. If you have no real bills, that is the best way to build a budget because you can put all of your money towards savings and create good habits. Since we do not live in a perfect world, I am going to presume you have bills and that is why you have no money.
Set Reasonable Goals
It may be a little more challenging, but with the right budget tools, you can begin to create a budget that works for you. The key is to set reasonable goals. If you have limited income, start small. You should set a goal for yourself that is attainable. It could be to save $500 in 6 months or to pay off one credit card in 6 months. They may seem like lofty goals, but I bet if you sacrifice and work hard, you can do it.
Once you set that goal, you can track your spending. An important part of budgeting is to write down where you spend money. If you do not track it, you have no idea where it is being spent. Once you know how you are spending it, you can begin to look for places you can save money. I promise you there is always space to cut your spending and save money.
Where Do I Start?
All this talk about why you should build a budget, but you are still feeling uncertain of how you begin, right?
Write It All Down
Remember that list you created a few steps back where you wrote down all of your expenses? Well, that was actually the first step. The first step is always the hardest, so you are already in a great place. Now that you have written it all down, you should go back through it one more time to make sure you did not miss any expenses. Remember, now is not the time to hold back. You are only hurting yourself. There will always be something unexpected so when you are listing your expenses, add 10 to 15 percent more for extra expenses. If you have that leftover each month because you did not have anything extra, you can put it in your savings account.
Categorize Your Expenses
Once you are sure you have all of your expenses listed, you should begin to put them into categories. You could have categories like Must Have, which could be a mortgage (rent) and car payment. Another category could be Important Items and that could be food, gas, insurance. You can have a utility category and an optional category, which could be cable and internet. Then you could have a category for Extras. These do not have to be your category names, but they should be something similar.
It Always Comes Down To Saving
The real truth of any budget is the savings piece of it. When you build a budget for a home remodel, or anything, really, you are going to have to save money for it. You have to start with the end in mind. It is important to understand exactly what your remodel looks like. You have to know what you want and list it all out. You should add about 10 percent to whatever figure you come up with because you never know what might occur. You also should set a realistic schedule for yourself. If you know you need to save $10,000 but cannot save more than $2,000 per year, you are going to have to adjust somewhere.
Cut Expenses
Saving money is a key piece to purchasing the items you want. The best way to save money is to cut expenses. You should already know that you have to cut spending before you build a budget. You typically cannot control your income, unless you want to find a different job or take on a second job. If you are not able to do that, you can only work with the income you have. That means that you need to make cuts to your spending. I touched on how to make spending cuts earlier in this article, but it is important, so I am going to revisit some of it.
I always suggest that you start with the easy spending cuts. There are easy so you do not really feel the loss and you can see money going to your savings quickly. This might inspire you to save more money. Start by cutting the items you do not use. I am sure there is at least one thing, such as a gym membership, that you pay for regularly that you do not use. Now is the time to cancel it.
Cut A Little More
Once you have done those easy spending cuts you have a start to build a budget that you can maintain. Now, it may get a little harder to make cuts, but if you are serious about saving for what you want, it is worth it. Take a critical look at where you spend the most money. It may be on eating out or shopping for clothes. I am not suggesting that you make drastic cuts but stopping all spending in that area, but begin to make reductions.
If you spend a large amount of money on eating out, try to cut it by half. Instead of buying lunch, start making your lunch and taking it to work. Stop buying coffee at the coffee shop and make coffee at home before you leave for work. You will see hundreds of dollars in savings. Really, you do not have to work hard to see those savings, you just have to do a little more planning. Once you see the savings roll in, it inspires you to make more adjustments.
Give it a month to see how these changes increase your savings and then you can adjust more by eating out even less. Perhaps you only buy new clothes once every other month instead of every month or several times within a month.
Other Tips?
It is always good to have some real budgeting tips before you begin to build a budget for yourself or your home remodel project. Believe it or not, there are always more ways to save money. Eating out is not the only place you spend money on food. Groceries are so expensive. A great way to save on your grocery bill is to plan your meals, make a list and only buy the items on your list.
You should also shop for sale items. Look for items that are on sale and perhaps adjust your menu for the week based on those items. You can buy store brand items and save almost half the cost of an item. If you simply start paying attention to the price you are paying for items, it goes a long way to helping you make better choices.
You can also make changes around your house that will save money. You can start with your utilities. If you adjust your thermostat by two degrees, you can save hundreds of dollars. If you set it two degrees higher in warm months and two degrees lower in cold months, you will save money. You can always add another layer of clothing. You should make sure that you turn off the lights when you are not in a room. You should also switch to energy-efficient light bulbs. The more energy you save means the more savings you see reflected in your energy bill.
Conclusion
It takes some effort to build a budget. No matter what you want to achieve with your budget, you should always have your end in mind. When you know where you want to go, it makes getting there much easier. When you are saving for your home remodel, you must start with an understanding of your income and expenses and how they are balanced, or not balanced at all. Then you can begin to make changes so you can reach your goals.
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