How Much Should You Budget for Home Improvement? (2024 Guide)

One of the most important parts of managing your home's finances is budgeting for home improvement and renovation projects. Whether you're looking to upgrade your kitchen, get a new roof, or repair cracks in your foundation, it's important to be smart with your wallet before jumping into your next project.

The Importance of Budgeting for Renovations

When talking to homeowners about the cost of renovation, you quickly learn that everyone has a story, and most of them are punctuated with a headache. McKenna Medley and her husband Michael bought a home in Nashville, Tennessee, in late 2016. It was a 1950s farmhouse in good condition, and the couple made the purchase knowing they wanted to add on a master suite.

They found a contractor on the recommendation of their realtor and liked his low prices, and around Thanksgiving began the process of converting the home’s mother-in-law quarters into a master suite. The estimate: two weeks, twelve thousand dollars.

When March of 2017 came and the renovation was still not complete, Medley and her husband fired their original contractor and hired out workers to complete the job. The final bill? Sixteen thousand plus the cost of workers to complete the job, which Medley estimates to be in excess of six thousand dollars.

Her husband still ended up doing most of the work on the project, and they’ve been left with issues like wobbling toilets and walls that don’t meet at right angles. “I never even considered that when you build a wall, it might not be straight,” she says.

If she had a do-over, Medley says she would “find the right contractor and not worry about the money. The cheaper contractor can actually cost you more money in the end. Don’t be so eager to get the cheapest—you’ll still pay for it later.”

As you're looking to upgrade or repair your home, how can you ensure you're staying within budget and on schedule?

Why Renovations Go Over Budget

The truth: most renovations will cost more than you expect. It’s estimated that nearly half of home renovations go over budget.

As in the case with Medley, opting for the “cheaper” contractor can quickly push homeowners over their renovation budgets. Contractors who are overbooked or not skilled enough for the work can protract schedules and produce shoddy work or even introduce new problems. The best way to solve the problem of the inadequate contractor is to thoroughly vet them on the front end. Take recommendations from friends and family and go see the work that the contractor has produced before you let them take on any work.

Other renovations exceed their budgets because homeowners simply want more than they can afford. “In my experience, prospective clients under-budget their projects by a factor of two or three, based upon what they have seen on TV, Googled on the web, or what a realtor told them.” Says Stewart Davis, Vice President and Design Manager at Austin-based design-build company CG&S. “In other words, to do the job right, it will take two or three times what most people expect. A good contractor or architect will kindly inform the buyer [of] this fact right up front so that informed decisions can be made early.”

Don’t be so eager to get the cheapest [contractor]—you’ll still pay for it later.

But you can get ahead of maxing out your budget by two or three times by carefully planning with your contractor before the project begins. Many people’s eyes are simply bigger than their wallets, and what you want is not necessarily what you can realistically afford, so start with a number, not a picture. “It’s much easier for designers to create remodel plans for your home if they know what your budget is,” says Jason Larson, Lars Remodel and Design. “When a design team has a target figure to work with they’re able to truly optimize the plans to fit your needs and budget.”

Custom work and finishes and luxury elements can also add up to exceeded budgets in the planning stage. “Projects requiring a lot of skilled labor tend to go over budget quickly, says Davis. “The more complex the work, the more likely it will exceed projected time and money targets.” If you’re running into budget problems during the planning stage, think high-low. If you’re a committed chef in the kitchen and have your heart set on that Viking range or water filtration system, go for it and save elsewhere by opting for laminates over hardwoods (there are lots of great laminate options that will fool most people).

The specific home renovation project will vary in cost due to labor, materials, size, location, etc. You can also save money by opting to DIY your project. For example, it may cost upwards of $2,000 to have professional install quality gutter guards on your existing gutters, but if you chose to order off Amazon and install them yourself, you could be looking at only a couple hundred.

The most common reason for exceeding a renovation budget? Changes. Among the contractors and architects we spoke to, a majority said that changes to plans once work has already begun are the primary reason they see renovations exceed projected costs. Make a plan and stick to it. The more detailed your renovation plan, the less likely you are to exceed your budget, so getting organized on the front end is crucial.

How Much to Budget for a Renovation

Homeowners should be budgeting at least 20% over the estimated cost of the renovation. Sit down with your contractor, be realistic about your budget, and set a contingency line item for 20% of the projected costs. You should be working with your contractor (and architect, if you use one) to help you stay realistic about itemized costs and projected timeline.

And if you’re working with an architect, make sure you get square on how their fees work. Some will charge you based on the final cost of the project, so as your contractor’s fees rise, so could your architect’s.

You should also consider tax credits and grants that may be offered to help you page for your home improvement project:

Budgeting for the Unexpected

There are plenty of costly renovation circumstances that can’t be planned for, especially in older homes—a water pipe broken as a result of the work, plumbing and electrical problems or pest damage could be discovered when a wall is opened.

You might even find that elements, like electricity, must be brought up to code or that you have asbestos that has to be removed before work can continue. Similar to how you should save 1-2% of your home's purchase price for home maintenance, you'll want to budget 30% over projected costs for unexpected expenses, especially for an older home.

Additionally, it could be worthwhile to expand your budget through financing and loans, which can help ensure you have the amount you need to get the job done the way you want it.

Always Save for Home Maintenance

The last thing you want is to plan a repair or maintenance project for your home and realize you don't have the money available, especially if it's a necessity.

Interesting facts and tips for home maintenance saving:

How You Can Save on a Home Renovation

Stay Organized

One of the best ways to ensure that your renovation project stays on schedule and on budget is to make sure you’re organized from the start. We recommend a tool like Homezada, which allows you to get cost estimates and create a budget for your renovation, bookmark ideas, and even makes it super easy track important documents (like contracts, permits, receipts, and owners manuals), your reno budget, and actual costs of projects for tax planning purposes.

Do Your Research: Itemize Your Budget

Even if you have a contractor working on the project, know what each item costs and the cost of labor per hour to ensure that their billing squares with your estimated budget.

For each item (yes, even things like paintbrushes and drop cloths), track:

Your budget—How much you have to spend.
The estimated cost—This should come with your research. Based on the specific items/elements/materials/projects you’ve chosen and your contractor’s rates, how much you project it will cost.
The actual cost—Once each individual project is done, log how much it actually cost.

Here's a video of Danny Lipford walking through some details on how he helped a homeowner solve their budget constraints on a kitchen remodel.

Read Reviews and Talk to Customers

Before you start requesting bids for your projects, vet contractors thoroughly. Reading customer reviews and actually talk to clients about their experiences. Did the contractor stay on schedule? On budget? What about the quality of their work? Did they correct mistakes free of charge? Any hidden fees? The same goes with architects and designers.

Get Bids From Multiple Contractors

“Try to get multiple qualified contractors to give you a bid for your project,” says John Bodrozic, co-founder of Homezada. “There can be a wide range in total costs that different contractors will provide in their bids. But make sure you check out their previous customer reference, their insurance, and a current contractor’s license.” Thoroughly vetting contractors can help you ensure that projects will stay on schedule and within budget.

Read our guides on how to deal with contractors:

Changing Your Mind Will Set You Back

Keep in mind that any changes you make once a project has begun will likely incur you a fee, whether that’s return fees for materials you didn’t use or the labor cost of your contractor backtracking on completed work, so if you’re on a tight budget, make sure you stick to the agreed-upon plan. Once you make your Pinterest board, avoid any more perusing that could distract your original plan.

Try an Off-season Renovation

For most contractors and builders, colder months are the off-season and some will offer discounts to try to drum up business when work is slow, meaning winter is often a good time to renovate. Ask prospective contractors whether they offer discounts at different times of year. Additionally, if you're in need of a unit installation project, the best time to buy systems and appliances is typically around major holidays when there are sales.