Laura: We are joined by Certified Financial Planner Heather Winner to discuss home renovations and then ways to save a little cash.
Heather – Owning a home can be really expensive, so what do folks need to know when they are gearing up for a home project?
Heather: I have a term that I use with my kids when they get easily distracted – I call it “being squirrelled.” When it comes to renovations, its very important to avoid “being squirrelled.” You need to have a plan and know what your budget is before launching into any project since “getting squirrelled” can easily lead to your project being over budget and taking WAY longer than intended.
Laura: Ok, I hear what you are saying about how easy it can be to blow your budget. How do you recommend people save for major repairs?
Heather: There are several great ways to pay for renovations:
• Tackle repairs as they come up, so that you are able to pay cash for them a little along rather than being hit by a huge bill at one time.
• Know your financing options. For example, it may be a lot cheaper for you to use a home equity line of credit to pay for big repairs, than a credit card.
• Save money for the big stuff – I recommend that people set aside roughly 2% of their home value each year in a savings account for the big stuff. For example, this would be about $2,000/year if you home is worth $100,000.
Laura: What about the person actually doing the work. Should home owners try and do repairs themselves?
Heather: That’s a giant MAYBE. A home owner should be honest with themselves about their skills and the time they have available to do any repairs or renovations that are planned.
For example, I know that I can paint my dining room, but I don’t have the ability to fix my air conditioning system. By identifying what jobs I can do (and that I want to do) – like the painting - I know how to best allocate my money and when to hire a pro.
The most expensive error home owners can make is over estimating their skills and trying to do a project themselves (or on the cheap). Because then it takes even more money to have their mistakes corrected and done right.
Laura: When you do decide to hire a pro, what should you do?
Heather: You need to be careful when hiring a contractor or professional to do any job.
• Check references from others who have worked with the contractor using sites such as Angie’s List.
• Look for local resources for who to hire – Augusta magazine issues a “best of” list each year that can help folks find reliable repair people and companies.
• Consider tying the contractor’s compensation to their ability to successfully complete the job on time.
Laura: Those are good ideas – do you have any final thoughts?
Heather: Yes – whether you are doing the project yourself or you are hiring a contractor – it is always good to assume it is going to cost about 50% more than your originally thought and take twice as long. If you have your budget prepared for both time and cost overruns, then you will not be blind sighted no matter what happens.
Laura. Good advice - For more information, you can give Heather a call at (706) 312-2000.