Monthly budget planning with your selected advisors can save huge amounts of time and money. Learn to have a proper financial budget for a project as big and important as your dream home.
Now that you have decided to build your home, you need to follow a monthly budget worksheet. This will help you stay within your budget. You will also be able to curtail costs that can spiral out of control.
Monthly budget planning is a very important part of building your home, so tackle it with aggression!
Your contractor should be able to provide an estimate of the construction cost based on the different phases in construction. Review every stage of
construction every month.
Refer to the estimates you had made in the original budget. Check for overspending at each phase. This will help you minimize expenditures in your budget.
The most important part of the monthly construction budget involves charting your income. Whether you are the only source of income or have a dual
source, they should all be accounted for in your monthly budget.
Make sure you jot down the expected date of every cash inflow. This will help you plan out the different construction stages.
If you are building with a construction loan, calculate the total outstanding balances at the beginning of every month.
Every phase of construction will have its share of extra expenses, no matter how well you chalk out your budget. Monthly budget planning with
contractors, accountants, and others involved will help you see what you need to do.
Ideally, you should keep about 10-15% of the total building costs at hand to take care of extra costs. This will help you stay within your budget, even if you are spending more than planned.
Home building comes with its own set of surprises. You should always keep some resources handy to tide over these unforeseen costs. For instance,
maintaining a 10% cushion of the total costs at hand is ideal when your contractor is opening up the walls or the floor of an
You never know what to expect! Household budget planning will ensure that you are adequately prepared for bad situations.
An important part of your monthly budget worksheet is to dispose of existing bills. As the construction progresses, you may want to pay your
banker or the builder.
You may have to pay sooner rather than later on, but it can be worth it depending on your circumstances. It also makes sense, you know. You don't want to end up with delays or fines because you forgot to pay them on time!
You should insist on a schedule from your contractor right at the start of your project. However, the trick is not to stress too much on the
amount you pay at completion. Ask for cost breakdowns and jot down the payments each subcontractor will expect at every phase.
For instance, the subs dealing with steel, concrete and site work will expect an early payment. Map out the costs you will be expected to pay each month. This will help you in being prepared.
If you are borrowing for the purpose of building your home, you will be able to make monthly withdrawals. A construction loan resembles a credit
line in a lot of ways.
Once you determine the exact amount you will need for the next month, you can make suitable withdrawals from your bank. Don't pay them earlier
than necessary. Remember, you are only paying interest on the amount outstanding!
Review every invoice carefully. Make sure you compare differences in the amount charged every month. You should also ensure that the outstanding
amounts do not overlap with the payments you have already paid.
Remember, it will not be easy to get your payment back if you have overpaid the contractor or any of the subs.
You should also be careful about change orders in the case of house building loans. Your monthly draw should be able to keep a track of change
orders. Your contingency funds should be able to fund any of the emergencies.
However, if you spend it too early, you might have to depend on your own equity to tide you through. Also make sure that you pay for changes only
if you need them. Don't let your contractor make you pay for his own mistakes.
Monthly budget planning is essential for planned progress. Make sure you involve the people who are actually doing the work in planning out your
expenses. The biggest advantage of monthly planning is that you are seldom caught unaware.
This is saying a lot, when dealing with such an overwhelming task as building your dream home!
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