Creating a budget for a home improvement project can be daunting if not downright overwhelming, particularly for first-time homeowners or those embarking on their first renovation project. What costs should be included in this type of budget? What sort of contingencies should be planned for? Is it important to build a cushion into the budget for overages?

To help sort through these questions, we asked renovation industry experts to share guidance on how to create a home improvement project budget.

Helen Norman

Research, ask questions, and plan, plan, plan.

The more time and energy you put into researching and planning your improvement project at the outset, the less likely you are to face unexpected costs that were left out. The extra bit of effort you expend early on can also help avert any project hold-ups.

“In the planning process, be sure to ask as many questions as possible. No question is too small or too simple,” says Baily Carson, home expert for Angi, a home service booking company.

One of the critical steps during the research phase of budget-building is investigating permits needed for your project (if any) and the associated cost. Permits can start as low as $100 for smaller projects and exceed $5,000 for very large projects, says Justin Goldman, CEO of RenoFi, which provides renovation loans for home remodeling projects.

“The national average permitting cost for installing a new water heater ranges from $20 to $85, while the average for kitchen remodels ranges from $500 to $1,500,” explains Goldman. “It’s important to account for permitting in your cost estimate early on.”

Another factor to consider during budget development is your proposed project timeline, which can also impact overall project costs.

“If your timeline is flexible, consider planning the project for the off-season,” explains Carson, who says seasonal supply and demand can potentially drive up your expenses. “Try buying materials when they’re on sale and booking pros when they have more availability.”

Factor in labor costs.

Materials will make up about two-thirds of your budget for a home improvement project, but that doesn’t mean the other one-third—labor costs—aren’t important. The price you pay for labor can vary by area, season, and availability. “This is one area where you don’t want to have to cut costs; a high-quality pro will be worth the price tag,” says Carson.

A reliable professional will provide more than just the service, but also be a consultant on design choices and selection of the right materials for your home and climate. A variety of home improvement sites can provide labor costs estimates including HomeAdvisor.

Obtain multiple estimates.

Another important early step when developing a renovation budget is obtaining estimates from professionals and well-respected home renovation websites, which can help you establish a clearer, more specific picture of the project’s projected price tag.

“Look at online cost estimates, ratings, and reviews, and talk to a handful of pros before deciding on the right one for you,” advises Carson. “Depending on the project, consider having at least three pros come to your home in order to obtain a more accurate estimate.”

Get budget-building done during design.

Getting all of the specifics of your project finalized during design (in other words, before you actually start construction) is a significant part of creating a sound and thorough budget, says Goldman.

This should include proper estimates for all of the materials that will be involved, including things such as flooring, cabinets, tiles, and more, says Goldman. Material prices can vary based on market conditions, so you’ll want to obtain accurate estimates.

Your design costs should also cover any new furniture that might be required for the renovated space, as well as window coverings, which are often overlooked when creating a budget. “These kinds of items can cost anywhere from $10,000 to $100,000 or more depending on taste, quality, and size of the home,” says David Steckel, home expert for Thumbtack, a home improvement resource that matches you with local pros.

Additional costs that can be forgotten when calculating a project budget include light fixtures and bathroom accessories. Your builder will ask about these sorts of features at some point, so be sure to include them in your cost estimates.

“Pot lights [also known as recessed or can lights] are not considered light fixtures, but your wall sconces or pendants over your island in the kitchen are,” says Steckel. “Bathroom accessories are the toilet paper dispenser, mirrors, and towel racks. It would be safe to budget between $150 to $500 per fixture and $250 per bathroom.”

Don’t forget to include a budget contingency.

Homeowners often wonder: How much should I factor into my budget for unexpected costs? The answer to that question can vary somewhat, but RenoFi recommends including an extra 5% to 10% of the overall renovation budget.

“While most cases run in the 5% range, Murphy’s Law reminds us that anything that
can go wrong will go wrong, so to sleep easy at night, plan on budgeting in 10% for unexpected costs,” says Goldman.

These unexpected project costs might even be triggered by you, the homeowner, says Steckel.

“In most projects, a homeowner will typically change their mind about a product after shopping around and starting to see the wide range of options available,” explains Steckel. “They might fall in love with dolomite marble counters and choose to forgo the original Caesarstone that was quoted, so it’s important to allow some room for making aesthetic changes to add a little extra joy to your budget. I recommend making sure you have at least 5% allocated for these upgrades.”

Factor ROI into budget-building.

Taking the return on investment (ROI) into account with home improvement projects can also help with developing a project budget. Here’s why: If a project is likely to increase the value of your home, then you might want to splurge a bit on costs and materials. However, if the project is not likely to have any impact at all on your home’s value, and is more about making you happy, you might want to find ways to be frugal to accomplish your goals.

“For example, a kitchen remodel can get expensive but can also offer ROI of up to 72%,” says Carson. “Try not to exceed 10 to 15% of your home value on a kitchen renovation, but assuming you stay under that range, much of the investment will pay for itself in the long run.”

Additional high-ROI projects include garage door replacements, window replacements, new siding, and bathroom remodels.

You might need accommodations.

If you’re planning a major remodel, such as a kitchen renovation or the addition of a new floor, you might need to spend some time bunking elsewhere while work is being done. The cost of alternative accommodations and associated costs should also be included in your project budget.

“This might mean staying somewhere else for a few weeks, or a lot of take-out food,” explains Goldman. “While this may seem small in comparison to the overall renovation, this kind of thing can add up.”

There will also be cleanup costs.

Homeowners often forget to include a final site cleaning in their project budget when tackling a significant renovation. Here’s why this particular line item is important: A post-construction clean is very different than your regular bi-weekly house cleaning, says Steckel.

“A post-construction clean requires special tools and a truck to haul away all the protection used to cover floors, counters, and more,” explains Steckel. “For a full home remodel, the post-construction clean can cost $2,000 or more, so it’s important to bake the cost into the budget when planning ahead.”

You might want builder’s risk insurance.

In some states, if you’re embarking upon a large-scale home renovation, you’ll also be required to obtain builder’s risk insurance, another item to factor into your project budget.

“Your homeowners’ insurance policy specifically precludes construction, and the builder usually only has liability insurance,” says Steckel. “This type of insurance typically costs between $500 to $2,000 depending on your project.”

Consider financing options.

Home improvement projects can come with high price tags, but there are a variety of financing options available to help you get the job done without having to cut corners. Do your research on home equity loans, cash-out refinancing, and other funding options, says Carson.

“There are also company-specific financing options, like pay-over-time financing available on Angi through our partnership with Affirm,” says Carson.

Don’t get attached to renovation budget templates.

Every renovation project is very different, so it can be hard to find a one-size-fits-all budget template to be used tracking your home renovation. The good news? Often, a builder or contractor will help put pricing together for total spending on the scope of work, says Steckel.

“But make sure you discuss your project with your contractor to really determine what’s required and what unexpected costs could arise along the way,” says Steckel.