Editor’s note: This story was originally published here penny hoarder.
Home improvement projects aren’t as entertaining as the ones you see on HGTV.
Tasks like cleaning HVAC ducts or replacing your roof aren’t as glamorous as a fancy kitchen remodel. And in real life, you have to face the burden of payment to get the work done – spending hundreds or thousands of your hard-earned money.
Many homeowners finance expensive repairs around the house, but setting up a home improvement budget can help you keep your debt load from growing.
Planning in advance for all your home improvement needs (or wants) gives you time to save for upcoming costs.
Here’s what to consider when creating a home improvement budget.
1. Think about what needs to be done
As a homeowner, you’ll likely encounter things that require maintenance work on a regular basis, like removing leaves from drains or cleaning your sump pump.
You’ll also probably have a good sense of issues that will need to be addressed soon, like a leaky roof or an A/C unit that’s on its last legs.
Start preparing for these expenses by making a list of all your upcoming projects. Think about all the things you plan to do within a year, but also think about the work you intend to do in a few years.
The longer time frame you give yourself to save, the less money you’ll have to put aside each month.
When planning what projects need to be completed, consider how much room you have in your main budget.
If you have enough disposable income and can easily set aside a few hundred dollars every month. But if you live paycheck-to-paycheck, give yourself extra time to save.
2. Prioritize what you need to handle first
Chances are there isn’t just one project on your household to-do list. When creating your home improvement budget, prioritize the most important improvements over nicer upgrades.
Another thing to consider: will you need minor repairs or a complete replacement? For example, calling a plumber to fix a problem with your toilet will cost less than installing a new toilet.
When it comes to nonessential projects, such as replacing the backsplash in your kitchen or upgrading appliances, prioritize the work that will give you the most satisfaction — or that will provide the highest resale value, if you plan to sell your home in the near future.
3. Get Multiple Quotes to Determine Cost
You may have an idea of how much you can comfortably spend on a project, but you won’t be able to accurately budget for the job until you get some quotes from potential contractors.
Find bids from at least three different sellers so you have options – and know you’re getting a fair price.
You may also be able to negotiate a lower price by letting your preferred contractor know that a competitor is offering a better deal.
Jill Emanuel, a financial coach fiscal health phoenixtold The Penny Hoarder that she got five quotes when she had her entire air conditioning system and ductwork replaced last spring.
She also recommends checking out home-improvement blogs and podcasts, watching tutorials on YouTube, and asking for recommendations from friends and family as part of your research.
4. Set up a sinking fund to save costs over time
Once you know what projects you need to tackle and how much it will cost you, it’s time to make a plan to save for those expenses.
Instead of taking out a loan and paying it off over time (with interest), start putting money aside little by little until you can pay the cost outright and not have to take on any debt. it’s called contributing sinking fund.
Let’s say you plan to replace your old refrigerator with a newer model that costs about $1,200. By saving $200 per month in your sinking fund, you’ll have the cash to buy your new fridge in six months. If you can save $300 per month, you’ll have money in four months.
Even if you don’t have any specific home improvement projects on the horizon, homeowners should regularly set aside money for future improvements and maintenance tasks. A general rule of thumb is to save about 1% to 3% of your home’s value each year.
“If we get into the habit of putting even a few hundred dollars into savings every month, label that account for home repairs and projects,” Emanuel said.
5. Keep money in an emergency fund
Despite our best planning, there are always things we can’t prepare for – like a terrible storm that floods the basement or the neighbor’s kid who breaks a baseball through the window.
That’s why it’s important to keep money aside emergency fund (And there should be an adequate home insurance policy).
Personal finance experts recommend keeping three to six months’ worth of expenses in an emergency fund. This is not money that you will use for planned expenses like regular maintenance or reconstruction of the house.
The money in your emergency fund should be spent on expenses that are urgent, unexpected, and necessary.
The costs of homeownership can exceed a down payment and regular mortgage payments, but with proper budgeting and saving, you’ll have the money to keep your home in good condition for years to come.