How to plan for those bigger home projects
I’m so excited about today’s blog post! In July, I did a 3 part blog series, How to bring Calm to Chaos, where I got personal and talked about how I maintain some semblance of calm here at home despite working full time from home and homeschooling two teenagers. I shared practices that I use at home to keep myself sane when life gets crazy, as it is known to do, and I also shared how I create a cozy calm home for my family to enjoy. During that series, I hinted that I would have a bonus at the end.
That bonus is a guest post by our Money Coach, April Stroink.
I asked April if she would write a post for my followers talking about how to plan for those bigger home projects. As a designer but also as a home owner, I get how expensive home ownership can be and you all know I love to do home projects on my own home and many of you may wonder how do we budget for those. So April is going to lay it out for us and explain to us why a budget makes sense for home improvement projects.
A little back story….
We began working with April in December 2019 after returning home to Nova Scotia having moved to Alberta in late 2017. To say we committed financial suicide when we decided to close down two businesses, sell our home and move out west would be an understatement.
Upon our return, we had goals, BIG goals and I knew in my heart we needed help to get us back on track ASAP. Because of our work with April, we not only got our businesses up and running again but, we also managed to weather the COVID storm without having any financial stress, managed to pay off debt and save to buy a new home. As you know we moved into our home just this past June! I think it is safe to say that within 12 months, we were doing better financially than before we even moved to Alberta in 2017! Here we are not even two years later and we are enjoying our financial freedom knowing how to make our money work for us!
So enough about my journey.
I asked April to write this blog post as I feel it is so important to plan for those house projects and feel good about them! I realize working with a designer is considered a luxury service but I also want my clients when working with me to feel good about tackling those home improvement projects as they allow you to take care of your investment but also allow you to feel good about your home. My new online design package, Bring Calm to Chaos, will help you assess those high priority problem areas before we get to work creating your design plan.
Why a budget makes sense for home improvement projects.
There are few words in the English language that conjure a sense of dread faster than the word budget. Budgeting makes you feel like you are giving up things you want. It feels restrictive and that is why most people fail at budgeting when it comes today-to-day spending.
Where budgeting does work is in short-term financial goals that have a beginning and an end, like a home improvement project.
Here’s why:
You know how good it feels to find $20 in the pocket of an old coat? Well, studies show that you probably felt worse losing the $20 in the first place. It feels better not to lose money than it does to find it. This is called loss aversion;
the pain of losing is psychologically twice as powerful as the pleasure of gaining. Therefore, when you budget for a home improvement project and allocate a portion of your income towards it you are less likely to “dip” into this account.
You don’t want to lose it to a short-term gain like going out to a restaurant. When your mind sees money accumulating in your home improvement account it will help you strengthen your willpower against spending it.
Conscious decisions
Imagine you’ve chosen to renovate your bathroom. You price out the labour and materials to create a cost estimate. Based on this, you save the money and decide to start the renovation. Halfway through the renovation, you discover that the floors underneath the tub are rotten, and it is going to cost an extra $700 to take care of the issue.
Now you have a choice. Select which option you think is best.
Try to select less expensive finishes or reduce the size of the project by $700.
Take the time to save the extra $700
Use credit to cover the difference
Whatever you decide, you need to look at all your options and make a conscious decision. You need to do a cost estimate, think carefully about each option and choose between saving or using credit. This process does not happen when buying groceries, gas, or a new pair of jeans.
Now that we understand the psychology of why a budget works for a home improvement project, let’s talk about the HOW.
I strongly believe that money needs a job, otherwise it will flow wherever it wants – thus the “I make good money! I don’t know where it goes!” syndrome! When I build a spending plan for a client I give their money the job of monthly obligations, weekly spending and irregular expenses (ie home improvements). Once I have these numbers I allocate a certain percentage of the clients income into their different spending “buckets”, including home improvements. The buckets can be different bank accounts labeled for their job (ie home improvements). It is best to have these accounts set up at a bank that is not your day-to-day bank (remove temptation – out of sight, out of mind). We then set up automatic monthly transfers to these accounts to fund financial goals.
In doing this, two things happen:
You start to see your home improvement bucket grow and the instant gratification that you used to get from spending that money (on who knows what) now gets transferred to saving it. As we discussed before humans suffer more from a loss than they do from a gain so as your account grows you will not touch it until it is time to spend on your home improvement.
Once your bucket reaches your goal, the fun really starts because you have the freedom to make choices based on your desires, not your limitations . And let me tell you, from personal experience there is no better feeling than a pre-paid project – talk about guilt-free spending!
Happy Budgeting Everyone!
Yours in Financial Health,
April
APRIL STROINK, BComm, RHU, EPC, PFP
April has been guiding families on their journey from financial chaos to fulfillment for over 20 years. She is a licensed financial advisor and certified Profit First Professional. April is a facilitator for the Department of Labour and Advanced Education and an Associate Professor at NSCC. She has helped hundreds of people and small businesses level-up their finances through her workshops, group programs and one-on-one coaching. In her previous life, April managed multiple investment teams throughout Atlantic Canada for a national insurance company and the owner/operator of a successful Halifax retail operation. April lives in Halifax with her husband and two teenage daughters.
