With summer activities now limited and more time spent at home, it can be tempting to give in to daydreams of home renovations, revamping décor, and the completion of overdue projects. While the may be excess funds in the bank account from the slow moving summer, this may not be the “new normal” as needs may occur for additional day care expenses, tutoring services, home office necessities with uncertain months ahead. The comprehensive financial planning process can help model several scenarios to allow you to move forward with greater confidence. Reporting and Financial Planning Associate Courtney Summa shares her thoughts on the perceptions of formalized planning:
“It is a common misconception that the financial plan is a ‘one-and-done’ process with no gray area. Not only can the plan work through revisions as needs and wants change, but it can also help participants analyze the what-if scenarios that tend to cause more stress than needed. While we don’t have a crystal ball, the financial planning process provides an amazing amount of clarity into the future”.
Home improvement television stations, magazines, and blogs romanticize the renovation and home project processes; however, costs vary greatly from project to project, and even state to state; sometimes county to county. Realtor.com shares the following national averages as a basic guideline:
- Kitchen: The national average cost of a kitchen remodel is $20,474. If a kitchen only needs minor upgrades, renovations should start at around $10,000. A full gut can reach more than $50,000, depending on the quality of materials and appliances installed, says Merrill.
- Bathroom: A bathroom remodel typically costs about $9,000 and tops out at $20,000. (Of course, you could spend more by adding such spalike touches as a steam shower.)
- New roof: The cost of protecting all your upgrades from the elements will run you around $20,000.
- New floors: You might want to top off your renovation by taking up that old carpet. Installing new wood floorswill cost about $4,400, while laminate, which is less expensive, will set you back about $2,800. Of course, exact cost will depend on how many square feet you have in the kitchen.
- Electrical updates: If you’re replacing an old panel (and a home’s worth of outdated wiring) as a part of your remodel, expect to spend $3,000 to $5,000.
- Replacement siding: Any great remodel includes an exterior upgrade. Putting new exterior sidingon your home runs to an average of $14,000.
- Replacement windows: If you plan to replace 10 windows and frames to save on your energy bill (you might need the savings after this renovation), the cost will range between $8,500 (vinyl) and $20,000 (wood).
- The contractor: Unless you plan to oversee the renovation yourself, a budget should include the cost of a general contractor. They usually charge 10% to 15% of the project’s total budget. So for a $50,000 renovation, expect to pay a contractor $5,000 to $7,500.
Another advantage of completing a financial plan prior to moving forward with a renovation is working with real numbers and a slight leg up on expected costs. Principal and Director of Financial Planning Olga Okaty CFP ® shares her thoughts on these advantages:
“We work with clients across the country and the globe, and put every effort into doing as much research and due diligence on their desired project as possible. We also have close relationships with contractors, architectural, and design firms who assist us in understanding hidden costs in given projects, where it pays to upgrade, and the questions to ask when vetting such professionals. “
From an investment management standpoint, we always recommend to reach out to your financial advisor anytime a big project is approaching so that liquidity needs can be accommodated in an optimal manner, with tax efficiency in mind. If you have any questions regarding our financial planning process, thoughts on structuring portfolios to meet large expense needs, or prioritizing financial goals, we welcome your call.