# How Do You Set a Realistic Renovation Budget? Phase 2:  Build Your Budget

- URL: https://www.renoversity.com/lessons/phase-2-build-your-budget
- Type: Lesson
- Access: public
- Course: How to Plan a Renovation, Step by Step (https://www.renoversity.com/courses/how-to-plan-a-renovation-step-by-step)
- Module: MODULE 1:  The Six Phases of a Home Renovation or Remodel
- Source: Renoversity

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Set a realistic total budget, a target budget, and a category-by-category allocation, plus a contingency fund, before you get a number back from a contractor.

> **Use three numbers, not one: a target, a contingency you never touch except for a genuine surprise, and a maximum you keep to yourself.** Almost every budget disaster I've seen traces back to the same root cause: the homeowner walked in with a single number in their head, and that number had no room in it for anything unexpected. A renovation without a documented contingency isn't a tight budget, it's a budget waiting for the first surprise to break it.

> ### The three numbers

> - **Your Target**is the number you plan the project around and share with contractors. Base it on what you can actually spend without financial stress, from real savings and what you can genuinely cash flow during the project.
> - **Your Contingency** is a separate reserve of 15 to 20 percent of your target, set aside before work begins. It exists for structural surprises, code compliance issues, delivery damage, and weather delays, the problems that show up on real projects often enough that I plan for them by default, not as an exception.
> - **Your Maximum** is the most you could spend without real strain. It sits above your target plus your contingency, and you don't share it with anyone you're hiring.

> ### The rule that protects the reserve

> If an estimate comes in over your Target, and it will happen more often than you'd expect, you have exactly three honest options: reduce the scope, choose less expensive materials, or wait and save more. What you don't do is quietly dip into the contingency to make an over-budget estimate fit. The entire point of that reserve is that it stays untouched until something you didn't plan for actually happens. The moment it becomes your slush fund for scope creep, you no longer have a safety net for the emergency that's still coming.

> ### Lesson recap

> Set your Target: what you can actually afford without financial stress. That's the number you plan against. Set aside a Contingency of 15 to 20 percent of your Target, separately. Do not touch it for anything else. Know your Maximum, and keep it to yourself. If an estimate exceeds your Target: reduce scope, choose cheaper materials, or wait. Never raid the contingency.