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Having an emergency fund — even a small one — can feel like a real life-saver. Angie Hicks, the co-founder of Angie’s List, shares a few tips on budgeting for home improvement.
“The last few months, we’ve been asking our houses to work overtime,” Angie said. “We are really, really putting forth a lot of wear and tear on them, asking them to be schools, work offices, and our homes. So now’s the time to be thinking about how we’re going to budget for any kind of expenses related to our house, and there’s really two ways to go about it.”
Angie said, “Think about the maintenance that needs to be done around your house and the other is to think about whether there are any upgrades or dream projects I’m thinking about. But the first thing to do is to go through and make a list of those items, independent of thinking about how much you want to spend, that way you can prioritize the most important things first.”
Plan to save about one percent to three percent of your home’s value every year for home maintenance expenses.
Some years you’ll spend more and some you’ll need less. Use your list to see how far your savings need to go.
“First you want to think about the maintenance projects you want to do to make sure you’re keeping your house running smoothly, and then after you lay those against your budget, think about the upgrades you want to do,” Angie said.
Return on investment
When considering upgrades it’s worth thinking about the return on investment, even if you aren’t planning to sell soon. So be sure to compare it with the homes around you.
“The key here is you want to keep up with the neighborhood, but you don’t want to be the highest-priced house in the neighborhood,” Angie said. “So if everybody has granite countertops, go ahead and put them in. But if they don’t, it might be an investment that doesn’t have a great return.
“Once you’ve decided how you’re going to spend your budget this year, now’s the time to get estimates. Keep in mind, a lot of companies are using more technology to provide estimates than they ever have been before. So you might be able to video chat with your contractor versus meeting with them in person. Ask about those types of tools they might be using when you’re getting those estimates.”
Get estimates that are itemized so you see exactly what you’re paying for and can effectively compare your options. If there are items on one estimate that are missing from others, be sure to ask.
And lastly, remember: always expect the unexpected.
“As you’re planning your individual projects, be sure to add extra cushion to your budget,” Angie said. “It’s not unusual that your budget might go over a little bit. So adding 10—20% to your budget makes sure that you don’t get surprised and doesn’t add undue stress on your project if things come up.”