Establishing the construction budget is the first step in planning your dream home. You disclose the budget to your architect and he/she will produce a design, including a plan for where to spend the money. But, these plans are not always perfect. Unforeseen issues often come up and bring surprise construction costs. This is when you need your contingency budget.
What is a contingency budget and how important is it?
Your contingency budget is your safety net. It’s the money you set aside to cover unexpected costs during construction. When you have this buffer, you don't have to take more funds from your savings in case you need to shell more money. It keeps you from going over your budget too.
It is very important to have a contingency budget. Without it, a project might get delayed or put on hold due to lack of funds.
The ideal contingency fund
Prepare at least 5-10% of the total project cost. The bigger the project, the bigger this fund should be. The older the house that you will renovate, the more money you should prepare.
The risks or unexpected costs that one must expect
There is no way to predict unexpected costs that might come your way, but a good designer can help you identify the risks in your construction project. When you have an idea of the problems that you need to address, you can anticipate the problems that might arise in the future.
Spending the contingency budget
Any change from the original plan and fixing underlying problems will add up to the costs. More work to be done means you need to pay the designers, builders, and trades extra. This is what the contingency fund is for.
Is it OK to cut the contingency budget?
We do not recommend cutting nor removing your contingency budget anytime during the construction, even if you are confident that no problems will occur. After the construction phase, you can use this money to buy nice
Who should manage the contingency costs? Is it the homeowner or the builder?
It depends on the situation. Sometimes, the builders include the contingency fund in the quote they send to you. You need to check the quote very carefully and see if your chosen builder included this in their calculation.
If there is no contingency fund in the builder's quote, it means that you will manage this fund.
For more valuable tips, follow Superdraft on Facebook, LinkedIn, and Instagram.
Find a great Melbourne designer.
READ:
Building on a budget? Read these expert and smart tips to avoid costly construction errors
