1. Decide how much you want to spend, and stick to it.
The average cost of an upscale kitchen remodel can be around $80,000 or more, but three factors should determine whether you want to spend that much.
The first is how much you can afford to spend. Take a look at your finances to determine this number.
The second is how long you plan to stay in your house. If you are planning on selling the home within five years, then your kitchen renovation should be viewed as an improvement on a real estate investment. Only spend what you think you will get back when you sell the house. If you plan on living in your home longer than five years, you should do a remodel that will make you and your family the most comfortable.
The third factor is your neighborhood. Is it modest, or upscale? If you put a ruling class kitchen in a middle-class neighborhood, you'll lose money on your investment when you sell your house. Don't over-improve unless you plan to stay in your home for a long time.
2. Set aside 20 percent of your budget to handle the unexpected.
You're going to encounter surprises in your kitchen remodel, especially in an older residence. There are all sorts of budget-busting surprises lurking behind the walls or under the floor. Like when you rip out your walls and discover your electrical wiring is out of date. Or you pull out your dishwasher and discover the floor beneath it is rotten thanks to a water leak you didn't know about. Leave some wiggle room in your budget to cover these surprises.
A reputable contractor knows how to manage, and plan for some of these surprises. When you are working with them on your overall budget, have conversations about what will happen in the instance of surprises, and cost overruns.
3. Make a list of your renovation priorities.
What's most important to you? New appliances? New cabinets? Write down your priorities so if unexpected costs hit your budget, you'll still get the top things on your list done.
When setting your priorities, think about how important the little goodies like crown molding and a super-luxe faucet are to the overall look and function of the kitchen. The little things add up. There may be a cost-saving alternative, or you may be able to do without the item entirely.
4. Know the details of how you will pay for this project.
There are many ways to pay for a kitchen remodel, but home equity loans are the most popular because they're tax deductible. Other options include refinancing, taking out a personal loan or taking a loan against a retirement plan.
Even if you have cash in hand, borrowing money at a low interest rate may be smarter than pulling your money from an investment account getting a higher return.
If you're getting a loan, factor in costs like interest and loan origination fees. Also, find out when you'll get the funding from your loan so you can make the payments to the contractor in a timely fashion.
5. Decide whether you’re going to stay in your home while renovations are taking place.
Living someplace else while the work is being done may be a good idea if the remodel will be extensive. Take into account the cost of an apartment or hotel, storage fees and moving fees.
If you plan to stay in your home during construction, a good contractor will have a plan in place to transition your family from using certain rooms during different stages of construction. You could also set up a temporary kitchen in an adjacent room, and you should add in the cost of doing this.
6. Create a spreadsheet for your budget and check it often.
Put your budget and how much you’re actually spending on spreadsheets so you can keep tabs on how much you are actually spending. A reputable contractor will have regular meetings with you throughout the process, to keep you in the loop on any plan adjustments, reallocations, or additional expenses.
7. Avoid extras. Don’t be tempted to deviate from your budget mid-project.
If you catch yourself saying “It would be so great if we added (fabulous kitchen feature here),” stop yourself. This is how both budgets and construction schedules get blown. Go look at that remodeling budget you made in step 1, and repeat the number like a mantra. If it was really important to you, you’d already have it in your plan from the beginning!