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Advice to Homeowners | Educational Presentations | Budget Secrets
Budget Secrets
1. Plan! Plan! Plan!
The most profitable businesses know it, successful
government leaders know it, retirees with adequate
finances know it...skilled planning reduces costs,
reduces the stress of surprises and prevents you
from committing to more than you can reasonably
afford.
The biggest secret to saving money is simply doing things in the right order! Most think it’s about negotiating labor costs or finding discounted products. An example of doing things in the proper order is sequencing improvements so that a basement supporting column is fixed (bottom rotting and you can’t see it) before the kitchen is remodeled else the sinking basement beam creates cracks in the new kitchen walls .
Consider having BAC assess your home so that you can use the Planning Pyramid to sequence repairs and remodels in a way that saves you money. Just remember....ignore planning and you will have far higher costs in the long run. BAC has created this unique "Planning
Pyramid" (pdf) providing the framework
for sorting through the complex sequence of projects.
The more you want to save, the better you need
to plan!
2. Total costs are as important as initial costs
We all have the instinct to minimize costs. But
it is better to minimize TOTAL costs instead of
just considering INITIAL costs. Consider the purchase
of a new water heater. INITIAL COST of option 1
is $600 while option 2 is $1200. The choice seems
obvious except that Option 2 saves this family $200/yr
in energy costs which are expected to rise 10%+
per year. At the end of year three, the cheap water
heater has a higher total cost. And at the end of
10 years, the cheaper unit has a TOTAL COST that
is almost $2,600 more while also having a shorter
operating life!
3. Time IS money!
Generally, pushing a project to be completed in
faster than average time will cost more. Tighter
schedules mean more risks of various phases bumping
into each other and causing inefficiencies.
4. Creatively use low-cost materials in low-risk
areas
Lower cost materials hold promise for saving on
project costs. Pick low-risk areas to use "non-standard"
materials so that unexpected problems are easily
fixed and do not affected many other phases. For
example, reclaimed lumber for interior trim is less
risky than using surplus metal beams under the main
bearing wall.
5. Use professionals...but wisely
There are some phases of a project you can work
on without help from a building professional. However
under-use of professionals can add costs and/or
result in problems. Like the home-handyperson that
finishes off a basement at a lower cost per hour
than a building professional. Yet the handyperson
used fiberglass insulation and plastic vapor barrier
on the foundation walls....quite possibly a big problem
with condensation and mold that will cost thousands
more to repair in only a few years!
BAC can help you figure out project phases
that need building professionals versus ones that
are less risky to tackle on your own. Regardless,
you should consider the DOMINO rule: When something
goes wrong early in the project, it usually affects
all subsequent phases thus compounding the cost
of the problem. So it is generally wise to maximize
professional expertise in the early phases of a
project.
6. Something else WILL come up
Unknown costs can easily come up that you will
be responsible for. Even the best contractor will
not know that you have a minor leak beginning in
a lead drain section behind the bathroom wall that has not
been opened up yet. You can certainly avoid the
scope addition by letting the leak grow and then
pay much more to have it fixed in a few months or
you can accept a scope increase. Planning to pay for some unknown fixes will prevent you from going over budget.
7. Slice up that budget
Many of us still budget for things like we did
when we were kids. For instance, when we wanted to buy a $95 bicycle
with our $100 in savings, we realized that we didn't
have enough to buy the lock and chain and the bike
got stolen! OK...so your new kitchen won't get stolen
but the lesson still applies. In the excitement
of budgeting for the fun new home improvement, you
will likely end up happier slicing up your budget using the following formula:
MAX BUDGET: XXXXX
SET ASIDES (at minimum):
Design 10%
Unexpected Costs 10% (bike lock and chain?)
Furnishings/appliances 5%
CONSTRUCTION
BUDGET: 75% of Max budget
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