Dreaming of new kitchen cabinets, a luxurious spa-like bathroom or the ultimate family games room in your basement can be a lot of fun, and seeing those dreams come to reality can be extremely rewarding. But a project that is left half-finished due to budget constraints or one that leaves you in a mountain of debt can quickly turn into a nightmare. So how do you budget for such a renovation? It’s less complicated than you think – as long as you follow a few simple guidelines.

  1. Set your budget number

While it may be tempting to simply grasp a number out of the air, it’s better to take a more calculated approach by determining to spend no more than the value of the room you are renovating in relation to its percentage of the entire house.

For example, if your home is worth $500,000 and your kitchen occupies approximately 10% of your home, you should spend no more than $50,000 to renovate your kitchen.

  1. Determine you financing options

With interest at the lowest it has been in years, it might be an ideal time to borrow. There are various options available such as lines of credit or re-financing your mortgage. To figure out which is the best option for you, it is recommended you speak with your financial advisor.

  1. Get a quote

The best way to get an accurate quote is to know exactly what you want. What work are you looking to have done? Do you have any specific types of materials in mind? The clearer a picture you can give to prospective contractors, the more accurate a quote they will be able to give you.

It is recommended that you obtain quotes from at least three different contractors, and before you select one of them, make sure that you get referrals and view some photos of their recent work.

  1. Stick to the plan

Once work gets underway, you’re likely to receive all kinds of advice from well-meaning friends and relatives telling you that you should do this or you should do that. But changes midway through the project can become costly very quickly.

So once you have an action plan, try to stick to it as much as possible.

  1. Factor in hidden costs

Very few renovation projects run smoothly from start to finish.  Nasty surprises such as water damage, poor electrical wiring and other defects may rear their ugly heads once the work is underway. Allot about 20% of your total budget toward these unexpected costs.

If there are no issues, you will complete your project better than budget, but if they do arise, you won’t be left scrambling to find additional funds.

Planning your renovation doesn’t have to be complicated, but it should be a priority. Take the time to calculate what you will need, and plan for the unexpected. After all, just think how much more you’ll be able to enjoy your home renovations when you don’t have to worry about money in the process.