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If you’re planning to build your own home, there are so many ways you are likely to blow your construction budget. Check out these six ways you might unwittingly destroy it, and then get helpful tips to avoid blowing it in the first place.
We recently had a conversation with our local building inspector that absolutely floored me.
He told us about how it is common for him to inspect newly built $500,000+ homes and for them to have plywood countertops at the final inspection. PLYWOOD. COUNTERTOPS.
Not granite. Not quartz. Not even laminate.
Why?? What is going on that people who have construction budgets a half million dollars or more that it is common to run out of money towards the end of the project and have to abandon their HGTV-ready kitchens for plywood countertops?
It seems remarkable, yet if you think about it, it’s really not all that surprising.
Even if you’re going to build an inexpensive home, there are many reasons why construction projects can run over budget. Here’s what you need to know to keep your building project in the black.
6 Reasons You Might Blow Your Construction Budget
1. You underestimate how much things will cost.
FIX: Take whatever amount you THINK something will cost and increase that by another 50%.
Seem like overkill? Good. Add another 50% to THAT and you’re in the ballpark.
Some things you may nail with your mental estimate, some will be delightfully lower, and some costs will blow your estimates out of the water. And if you find yourself saying, “Not me! I know exactly how much this will cost and I’m never wrong,” just stop yourself right there.
Homebuilding is a very humbling experience. You quickly find out exactly how much you don’t know about things.
You will also quickly find out that circumstances in your environment will impact the final cost of your building materials and services.
For example, we initially thought our concrete slab would cost about $9-10K. And then our contractor for the job broke not one, not two, but THREE augers trying to bust through our limestone. Then when we got to pouring the concrete we ended up needing another partial truckload of concrete. The job took longer than anticipated and the equipment/material costs meant we actually paid closer to $13,000, a good 30-40% over our original estimate.
Do yourself a favor and go ahead and multiply your entire homebuilding budget by 1.5.
2. You get blindsided by unforeseen expenses.
- Multiply your budget by 1.5, as directed in number 1 so you have some wiggle room.
- Consult as many local building experts as you can about your specific property before and after you buy.
- If you are able, keep a building surplus or emergency fund to cushion the blow on big expenses.
- Have a contingency plan for how to save or acquire extra money, especially if your unforeseen expense is time sensitive.
This can be a tricky one. After all, how can you possibly plan for things you can’t predict?
For example, we didn’t anticipate how much money it would take to properly build a septic field, drill our concrete piers, and dig the holes to bury our septic tank and cistern on our rocky terrain. I mean, before we bought the property and scraped the topsoil for the septic field we didn’t realize we even HAD rocky terrain!
In different soil conditions it would have been quite simple for us to dig those holes ourselves, but we didn’t forsee having to pay someone to bust through layer upon layer of limestone on three separate occasions.
It is also worth noting that some unforeseen expenses can be time sensitive, meaning that if you don’t get the job done right then it can jeopardize your entire build. A good example of this is getting your trusses covered with a roof as soon as you can after installation. If you run out of money at this point it is better to borrow what you need (even if you’re trying to avoid debt) to avoid a much bigger loss (like your trusses or entire framing system). Your pride will recover but your house might not.
3. You don’t monitor your spending over time.
We are guilty of this as much as anyone. It’s far too easy to be at the hardware store, see something you “need”, and think, “It’s okay! We have the money!” This is especially true if you are building with cash or have a loan that doesn’t require you to follow a draw schedule or construction procedures.
- Don’t fall for “upgrades”. This is especially true if you’re hiring a builder. “Oh, it’s only another $800 to upgrade to ____!” In the scope of a large budget, that $800 might not sound like much, but if you keep doing that it adds up in a big hurry. You can usually do some of those same upgrades yourself later for a much lower cost.
- Keep a running budget synced to your devices. If you are building with a partner, make sure this is something shareable. You can keep it simple and use a shared Google Sheet (like Excel) to track your expenses or sign up for a free service like Mint.com.
- Keep a paper budget hanging out WHERE YOU CAN SEE IT. Sometimes it’s good to be low tech. The simplest way to do this would be to keep a paper list hanging somewhere like a door or on the fridge, and each time you have a new expense you write it down on the sheet, adding it up as you go. We kept a paper version of our debt snowball on the fridge, and having it out in the open was a great way to stay accountable. A paper expense sheet will help keep purchases fresh in your mind so you can avoid overspending.
- Save every receipt! This should be a no-brainer, but it bears mentioning. This came in outrageously handy for us to have already been doing, but save each receipt and either scan it or mark it in a document somewhere.
4. You prioritize looks over functionality.
- Price out the cost of the vital home components FIRST to see what is left for finish work.
- Set money aside in a special account earmarked for particular building projects like excavation, septic, power, etc.
- Look for ways to lower the cost of your finish work by using Craigslist, Facebook Marketplace, local building reuse centers, and even salvaging materials from other buildings yourself (with permission of course)
- Repurpose, repair, reuse, and upcycle old fixtures to eliminate the cost of buying new.
If you’re going to invest a healthy sum of money into your home it needs to have strong bones. No amount of granite countertops will fix the fact that you used shoddy lumber or cut corners on your plumbing.
Aesthetics can be managed and changed over time, but the quality of the framing members, insulation, and systems (i.e. power and water) need to be the best they can be right from the start.
In other words, if you decide to spend a ton of money on the highest quality cork flooring you can find or handmade mahogany cabinets or something, don’t be surprised when you have to slap a plywood countertop on top of them.
5. You blindly trust “expert advice”.
Ironically, that includes us! Don’t just take any building advice you get at face value.
- Do plenty of research ahead of time. Read everything you can! Watch videos! Ask experts in your area.
- Make the phrase, “Let me take a look at that and get back to you,” a habit when talking to company representatives.
In our experience, most company reps at places helping us deal with items like our solar or radiant heat have been overwhelmingly helpful. At the same time, it is very easy for those same kinds of people to try to upsell you on something that you don’t need. In fact, sometimes those upsell items can actually be BAD for your overall home plan, so do your own research and don’t just say yes to everything just because you think you should.
6. You don’t account for the “little costs” inside every job.
This is a bit of a tricky one because we understand that it is almost impossible to know every little thing you’ll need to buy in the course of a home build. Those little things can really start to add up.
A few tubes of caulk here, a bucket of nails there. It all costs.
So what can you do to avoid blowing your budget on little costs?
- Set a monthly house spending budget and stick with it (if you’re building for cash as you go).
- Set aside a few hundred dollars for each job (framing, plumbing, electrical, etc.) for little things like nails, caulk, wire nuts, PVC cleaner, etc.
- Create an outline of broad categories like plumbing, electrical, foundation work, framing, roofing, etc. then break each category out into subcategories to get a better look at your potential expenses.
- List out every little thing you can think of within a particular job and price it out at your local hardware stores.
Here’s a practical example of how part of an outline can start:
A. Drain Lines
- 4″ PVC – 50 feet
- 3 4″ elbows
- 2 4″ sanitary tees
- PVC cleaner
- PVC primer
- PVC cement
If you are unsure of what smaller materials and components you will need, check with a professional in those areas. For example, we consulted a friend who is a master plumber who created a riser drawing for us based on my diagrams. We also read several plumbing and code books before we began the job.
Start with just the large categories and do a rough estimate on those, making sure to add at least another 50% to your estimate as stated in number 1. From there, find your subcategories and begin making a working list of materials.
You probably won’t be able to anticipate every little item, but you’ll get close. Adding that extra 50% will go a long way to keeping your expectations in check. Seeing individual items will help you keep the long view on your build and reduce the temptation to spend money when you know what you’ll need to spend it on.