Friday's Five Minute Finance: By the Numbers - Wuh !

...two three, wuh!

Sorry, that's military drill, some habits are hard to shake! But lets face it, everything pretty much seems to run by the numbers. Marks to get into university, dollars paid in tax and saved in super, mortgage repayments, plus funds to bankroll the all important renovation. Which, as I promised last week, I would cover off on today in the first of our new Friday Five Minute Finance time slots.

Everyone starts a renovation with a budget, and we were no different, however our renovation funds were to come completely from savings with no borrowings included in our planning. This was an important aspect to manage, in terms of controlling costs tightly, as once the funds were gone they were gone and we weren't borrowing additional funds to chase cost overruns. Thankfully I kept a pretty detailed spreadsheet, which I'll draw on soon to illustrate where the funds were allocated and where they were spent, and Kate and I love a good bargain so we made the most of trying to save where possible. Another key aspect was this is not our forever house, it's the learning house, so we weren't shelling out for top of the range over the top pricey pieces in terms of any fit outs, appliances and hardware.

All in all the best laid plans of mice and men came up across the regular 'unexpected' emergencies. You know, the things you know you need to budget for, even though you don't know what they are yet... which is why you should always allow a buffer of 10% to 20% when allocating dollars to projects and tasks. We did that, and it was largely eaten up by the first unexpected hurdle we encountered... But overall how did key budget aspects work out compared to estimates...? Check out these cool pie graphs below to find out (I haven't had this much fun with graphs since primary school ;-)

Electrical was a huge budget burner. While we expected there might be some surprises, we didn't expect the house to be unearthed - you can read about that high voltage near miss here. Our electrical estimate was approximately $1,900 versus an actual expenditure of $4,210 (and counting since the fuse box needs updating...). Quite significant when our contingency budget overall was approximately $4,000 in total.

Our other big cost blow outs were the bathrooms, but at the same time they could have been much worse. My estimates were based more on a cosmetic refresh, planning the renovation in isolation from the east coast of America, whereas in actual fact things were a lot worse than they seemed from memory and recent pictures. That's just life though when the ol' girl was built in March 1957 and the last bathroom refresh was in 1975! And when I say it could have been worse, I mean that when we realised we needed to do a 90% gut and refit in each bathroom, we did it properly but without going overboard. Estimates for bathrooms range from $10,000 (for an ensuite) to $25,000 (for a main bathroom). We were pretty chuffed to pump them out for $5,900 (the girls bathroom) and $6,700 (for the master bathroom). How did we do this? By doing all the gut and demolition work ourselves (huuuuuge labour saving), and all the painting ourselves. You can see the finished bathrooms here and here, but to refresh your memory here is a snapshot of the difference below...

So how did we achieve our savings when we had overruns in other areas? By robbing Peter to pay Paul, and concentrating on...

a) areas that had to be done, 
b) items that would add value to the property overall, and
c) getting multiple quotes and following word of mouth leads to get expert help when required.

Take the front and back stairs for example. They had to be done. Could I do them? Maybe. How long would it take? Weeks most likely. Our quotes ranged from between $14k and $17k - and that was just to do the stairs!! In the end we got a top quality job done front and back for around $9k, which you can read about here and even better the job was complete in four days. Likewise for the carport replacement, we were quoted from $8k to $20k (double carport vs double garage shed) - in the end we got the job done with some tradies, elbow grease and a bit of shopping around for ~$2,300! Sometimes it just pays to shop around.

Some other helpful hints for meeting budget pressure points is knowing what you are good at, and what you can do versus what you think you can do. The tradies we got to know well all made the same common point - you'll save more money by doing the demolition work and shit jobs yourself, and by paying the tradies to do a skilled job quickly. Yes you probably can dry sheet a room in seven days on your own, but your tooled up tradie can probably do it in a day and a half. Remember if you are realistically capturing costs, you have to put a price on your time as well. 

And my final finance tip for helping your budget meet its bottom line; good manners, cups of tea and/or a cold drink. It's amazing how the simple gestures in life can establish good working relationships, better quality work, and good outcomes for both the renovator and the tradesman.

So how did we go overall with the budget? Like I said, we robbed Peter to pay Paul, so a lot of the money we had budgeted for on outdoor areas like the carport and landscaping, were consumed on the big items already mentioned. We allowed a 10% contingency, and we came in 11% over budget, drawing on additional savings from investments. The landscaping that didn't get done inside the budget will be tackled as time and funds become available. All in all not too bad an outcome.

Anyway, that's it for this Friday's Five Minute Finance - next week I'll be covering off on another important subject near and dear to everyone's finances - Insurance! Until then I'll leave you with this 'spot on the money' quote from Grand Designs Kevin McCloud...

"Contain your budget and contain your ambition, allowing yourself up to 20 percent contingency fee on the project. If you don't spend it on the house, you can spend it on sofas and a holiday at the end; you'll need it."

Go you good thing!
Cheers, Col