Budget Estimating

You've made the decision: You want to build your own home or complete your own remodeling project. You know the size of the house you want, you know where you want to build and you've talked to a lender about a home construction loan. Now it's time to get a handle on all the costs involved. A budget is best completed at the beginning of your project so that you can estimate your costs, including everything for your new home or renovation, and then hone your financial plan as your project progresses. Putting a budget in place, even at the estimate stage, will help you control your costs before the first nail goes into place.

You need to consider two factors. First, there are hard costs, which are defined as the labor and material required to complete your home. Then there are soft costs, which take everything else into consideration. Your budget estimate for your hard costs will give you a foundation for drawings and specifications.

Look at your first budget estimate as a way to consider the feasibility of your project. It's a way for you to determine your design and building options. Once you begin to review your budget, you can use this process in every facet of your project.

Identify your priorities. If you know that you simply cannot live without imported marble tile in your kitchen, make that the top "must have" on your list of priorities.
If an item on your "must have" list is more expensive than you imagined it would be, determine what you would trade off. In other words, you might sacrifice a second fireplace downstairs as a trade-off for the marble tile.
Complete a cost/benefit analysis. What will be the features you want add to your family life or the overall appearance of your home? Or when, many years from now, you may consider putting your home on the market? In other words: Are these features worth the cost?
Take these changes into consideration when revising your cost estimates.

Remember, with every product you choose there is a cost range. For example, if your cost range is in the "luxury" arena, you may want to include the imported tile. But you also have other range options:

Economy: These features will get the job done for the least amount of money.

Modest: These products will be of better quality but will be the "no-frills" versions of these products.

Custom: These are features that will be personalized according to your wishes. These are not products that are available off-the-shelf.

Luxury: These materials are the highest quality and will be the most expensive.

Matching the materials and items with the price category that you can afford will help you determine your budget estimate.