5 tips to help keep your reno on budget

Spend a Sunday visiting open houses around Toronto and you’ll notice something: Canadians love to renovate. In fact, two-thirds of Canadians, according to RBC’s annual Renovation Poll, completed a renovation in the last two years.

But as nice as your neighbour's new kitchen looks, it’s likely those new granite counter tops and sparkling hardwood floors put them into serious debt. The RBC poll reveals that while 68 per cent of Canadians developed a renovation budget, only 49 per cent stuck to it.

“This doesn’t surprise me,” says Pat White, executive director at Credit Counselling Canada. “People in general don’t think about what it’s actually going to cost.”

Patricia Everingham, director of RBC personal lending, says Canadians often get into trouble because they start adding on projects. White agrees. “It’s easy to get carried away with that flooring looks so much nicer than the other flooring,” she says. “But it still comes down to the question, what can you afford?”

Exceeding budgets isn’t just bad for the budget, it’s stressful. The survey revealed that 28 per cent of respondents said blowing their budget was a huge mistake.

White’s seen this time and time again. But while anything can happen during a reno that may drive costs up, she offers some tips homeowners should consider before redoing a room.

Write a budget down

For a lot of people a budget consists of some number that floats around in their head. That’s trouble, says White.

“You have to write it down,” she says. Make a detailed list of what you need to do and how much it will cost. White, who’s renovating her bathroom right now, says she got quotes for paint, flooring and trim and knows how much she’ll have to part with before she starts the renovation.

Shop around

It’s easy to hire one person time and time again, especially when you’ve heard so many renovation horror stories. But White says you need to shop around to get the best quote. That doesn’t mean calling every contractor in the Yellow Pages. Get recommendations from friends, and find out if that handyman stayed within your buddy’s budget.

Price in unforeseen costs

“When you do one thing it causes something else to happen,” says White. She says homeowners should budget about 15 per cent extra to cover unforeseen charges.

“You’re building that cushion for your budget,” she says.

Pay in cash

If you can, save and pay in cash. The RBC survey said that while 55 per cent of Canadians used savings to pay for their renovation, 38 per cent used their line of credit or credit card and 41 per cent expect it will take more than a year to pay that credit off.

Credit cards could be used for small makeover projects, says Everingham, but White cautions anyone who puts their renos on plastic.

“You have to think about the cost,” she says. “What’s the interest rate on the credit card and can you pay it off when the statement comes in?” Interest payments could significantly add to the cost of a renovation if a card or line of credit isn’t quickly paid off.

Work in installments

Everyone wants their house looking its best right away, but doing everything at once is a sure fire way to land you in debt. White says it’s better to split up big projects.

“Renovations are difficult and can upset the home schedule so we always want things done right away,” she says. “But it may better finally to do it over the long term. People often don’t consider those options.”

However you choose to budget, it’s important to keep your whole financial picture in mind. White sees people who’ve worked on their house and then fall ill and can’t pay their credit. Spending too much too soon, even on a gorgeous brand new bathroom, can hurt your family’s overall bottom line. “Just be realistic,” she says.