Setting a realistic budget

Money is the most common reason building projects stop halfway. A realistic budget protects you from that.

By the end, you will be able to list the main costs of a project. You will also be able to set money aside for surprises and check how you will pay.

What your money pays for

The price of building work is more than bricks and labour. Most budgets include these parts:

• Materials, such as cement, steel, timber, tiles, pipes and wiring.
• Labour, meaning the wages of builders and skilled workers.
• Professional fees for designers, engineers and surveyors.
• Approval and connection costs, such as permit applications and linking to water or power.
• Equipment hire, transport and waste removal.
• Finishes and fittings, such as doors, kitchens, bathrooms and lights.

Ask for each of these separately when you get quotes. A single total price hides where your money goes.

Add a contingency for surprises

A contingency is money you set aside for problems you cannot predict. Old buildings often hide damage. Prices of materials can rise. Bad weather can slow work.

Many people plan a contingency as a share of the total cost. For example, if the work costs 50,000 and you keep 10 of every 100 aside, your contingency is 5,000. These figures are only an example. Ask your builder or surveyor what is sensible for your type of project.

Do not treat the contingency as spare money for extras. Use it only for real problems.

Plan for hidden and ongoing costs

Some costs appear later. You may need somewhere else to live while work happens. Your insurance may change. Taxes on property or building work may apply.

Rules on property taxes and building fees are different in every country. Ask a local tax adviser, a lawyer or the tax office what applies to you.

Think about running costs too. A bigger home costs more to heat, cool, clean and repair. Good insulation and quality materials can cost more now but save money every year.

Check how you will pay

Decide how you will fund the work before you start. You might use savings, a loan, a mortgage, help from family, or a mix.

If you borrow, a lender may pay out in stages as the work progresses. These stage payments are sometimes called drawdowns or tranches. Make sure the payment timing matches when your builder needs money.

Lending rules, interest and deposit or down payment levels vary by lender and by country. Speak to a lender or an independent financial adviser before you sign anything. Never start work you cannot afford to finish.

Keep track as you go

Use a simple spreadsheet or notebook to track the budget. List each cost, the amount you expected and the amount you actually paid.

Check it every week while work is happening. If one area costs more, you can save somewhere else early. Waiting until the end leaves no room to adjust.

To get clear prices for materials, you can send a materials list for quotes and compare the offers.

Common mistakes

• Comparing quotes that include different things. Ask every builder to price the same brief and list costs separately.
• Spending the contingency on upgrades. Keep it only for genuine surprises.
• Starting before funding is confirmed. Make sure all the money is agreed before work begins.

Key points

• A building budget includes materials, labour, fees, approvals, connections, equipment and finishes.
• A contingency protects you from surprises and should be used only for real problems.
• Confirm how you will pay for the whole project before any work starts.