How to Keep a Budget while Building a House

Keep track of expenses to stay on budget.

Building a new home is one of the more stressful life events that you will experience. The stress to stay on schedule and within the limits of your budget can create many sleepless nights. There are a few easy ways to stay within your budget. Set appropriate goals and keep close tabs on your expenses. This will keep you under budget and make the home building process considerably less aggravating.

Instructions

1. Set an overall budget number. This is the ultimate number that you will try to work back from, keeping all of your total expenses under this number. Set a goal that you think can be realistically met.

2. Obtain bids from the various contractors who will be working on your home. Be specific when obtaining bids. Include all items and work that will need to be done. One of the easiest ways to go over budget is by issuing change orders or additions to the original plans. Consider what materials you will want to upgrade. Get bids for both standard and upgraded material. For example, ask for a bid on both granite counters and a less expensive Formica. This will allow you to make decisions about finishes as you set the budget.

3. Total the bids. Cut and add items and finishes until your total is under your goal budget number. Staying under budget requires you to make tough decisions. Custom cabinets may not be in your budget. Decide which items you will upgrade.

4. Create a spreadsheet with each line item's budgeted dollar amount. You can create this document on paper or on computer software. Add a column for the actual amount.

5. Make an agreement with your contractors that they will notify you of any increases in price before they begin the work. Insist on seeing the changes in writing. Some changes are inevitable. Your contractor may discover unforeseen issues with plumbing or electrical as they get started with the job. Seeing the changes in writing and signing off on them as they come up will keep you informed and allow you to modify your budget to accommodate the changes.

6. Avoid the "might-as-wells." Many homeowners fall into this trap. You know that some day you would really like a swimming pool, so you decide that you might as well do it now while the backyard is already torn up. Stick to your budget.

7. Keep track of your actual expenses. On the same spreadsheet, next to the budgeted amounts, keep a log of the actual money spent on each part of the job. When you go over budget on one area, find another area to trim expenses. Constantly shift and adjust your budget as the work is completed.

Tips & Warnings

• Hard costs like concrete for the foundation and lumber for the framing are difficult to adjust without completely altering your plans. Soft costs, like granite, cabinets and flooring can be modified to fit within your budget. Look for ways to trim the budget with less impact: granite tile instead of granite slab or hollow core interior doors instead of solid wood.

References

• HomeBuildingRemodeling.com: How to Set Your Budget for Home Building and Stick to It