What is a Contingency Budget?
You may have come across the term "contingency budget" in the context of renovation or construction, and you might be wondering, "What exactly is a contingency budget, and how much should I allocate for it?" A contingency budget is a set-aside fund, in addition to your planned expenses, designed to account for unexpected costs that may arise during your bathroom renovation. It should be considered as part of your overall renovation budget and evaluated upon project completion to determine whether the amount was necessary or not.
Why you need it
The construction industry is often referred to as "high risk" due to the numerous variables involved in the process. Many aspects of construction may not always go as planned, and unforeseen events can range from trade contractor issues to supplier order delays or unexpected findings during demolition works.
When the costs occur
For instance, during a renovation, items or tiles can easily get damaged, necessitating additional expenses for replacements or repairs. More extensive issues may also be uncovered during the demolition phase when walls and flooring are removed in your existing bathroom. This might require additional plumbing, carpentry, or electrical work to rectify structural damages before proceeding with the renovation. Since the exact costs of such unforeseen circumstances cannot be confirmed until they are visible, it's nearly impossible to allocate precise amounts within your contingency budget.
If you dont include a contingency budget
It is essential to incorporate a contingency allowance into your renovation budget to prevent exceeding your financial limits, which could lead to added stress and financial burdens if unexpected costs arise. Homeowners who overlook setting aside these funds often find themselves at a significant disadvantage when unforeseen situations occur. While the ideal scenario is to avoid needing these extra funds and staying within or under budget, the reality is that unforeseen challenges can and do arise. We highly recommend including a contingency budget in your renovation strategy, particularly if you have limited prior experience with renovations.
How much to include in your contingency budget
A reasonable average to set aside for a standard bathroom renovation is approximately $2,000 to $3,500 (however this is heavily dependant on the extent of works you are doing). This estimate is based on our experience assisting clients with renovations, during which we have found that most unforeseen variations occur during the demolition phase when internal building defects and issues are discovered beneath the existing walls and flooring. Some of these issues result from age-related wear and tear, while others may stem from original building defects that have worsened over the years. We advise setting a higher contingency amount for older homes, as the likelihood of encountering additional structural issues within the original home structure is greater. It's important to note that this amount applies to each bathroom being renovated. If you are upgrading multiple bathrooms, allocate this amount per bathroom when establishing your cost allowances in the overall budget.
In conclusion, a contingency budget is a crucial component of a successful bathroom renovation project. It serves as a financial safety net to address unexpected costs that may arise throughout the renovation process, helping to ensure that you stay within your budget and minimize stress. By understanding the importance of a contingency budget and allocating the appropriate amount, you can approach your bathroom renovation with confidence and peace of mind.
