Most of us can estimate, within reason, roughly how much a new home or renovation can cost.

Most of us can estimate, within reason, roughly how much a new home or renovation can cost. The old tried and true, roughly about, rule of thumb, my brother-in-law said “6 grand a square” method is alive and well at every dinner party in the country.

The truth is, that while guesstimates can put you in the ball park, nothing replaces proper research and planning to give you an accurate figure on what the project will cost. The same is true when it comes to setting a budget to identify,
• Can I afford the planned project, or
• How much do I have to spend on the project.

It is essential to establish how much money you have available and will the funds see you through to the end of the plans? Building, extending or renovating will have a significant impact on your lifestyle while the works are under way, but will have other impacts on your life before and after the project.

Budgeting
Understand how much you spend weekly and annually. Where does your money go? The ultimate aim is to control your money and not the other way around. Plan and control your finances. Calculate your income and expenses and then organise your finances to reduce the syphoning off of portions of your cash.

The first method of working out the finances is to prepare an annual plan. Prepare an annual planner which lists all of your expenses including,
• Mortgages or rentals
• Insurances
• Medical
• Car
• Education
• School fees
• Credit cards
• Loans
• Utilities
• Telephones
• Holidays
• Travel
• Pets
• Personal ie alchohol, cigarettes, subscriptions etc
• Entertainment
• Dining out

In fact, everything you spend your money on. Then add 10% to cover what you have missed. Base you calculations on actual records kept of your expenditure or check your credit card statements. Credit card statements are a good reminder of forgotten expenditure like emergencies.

Add all of the columns on you plan together to identify your total annual expenditure. All that remains is to compare this to your annual income. The amount left over will show you just how much you can save towards your project or how much you will be able to borrow from a lending institution.

The alternative is to calculate your expenses fortnightly. The calculating list is exactly the same as your annual planner. The main advantage is the fortnightly planner coincides with a fortnightly pay structure. The time period can be adjusted to match whatever pay period you have. Calculate your fornightly expenses and round off annual figures by dividing them by 26 for a fortnightly plan or 12 for a monthly plan.

Spreadsheets & Planning kits.
There are a number of computer spreadsheets, planning guides and hard copy planning kits available from various sources and organizations along with money management advice. Good advice is always available from your lending institution, financial advisor or broker. Ask for a copy of their planning kit to make entering your financial data easier and don`t be afraid to ring up for advice if you are not sure or having difficulty.

Finance
Having the budget finalised, you are now equipped to apply for the finance you need to complete your new home or renovation. The best product for your situation will be identified by the lending institution, your financial advisor or broker.

Dealing with a finance broker specialising in your type of construction will maximise the finance package for you. For example if you are owner building dealing with a lending institution which does not normally lend to this part of the building industry, your choices may be limited. In fact the products available to you may not give you what you need. A good broker will be dealing with a range of lending institutions and be able to offer a larger range of products to suit your situation.

If you would like a free copy of a planing chart, please call me or Practical Owner & Builder magazine and we will be happy send one to you.