Budgeting for the unexpected

Finance journalist Michael Pascoe talks about what to anticipate when building or renovating a home

There might be people who manage to build or renovate a home on time and under budget – but I don’t know any such person. Come to think of it, I don’t know anyone who knows such a person.

Thus it’s wise to budget for your budget not being quite right. That means keeping some funds in reserve as you don’t want to end up with credit card debt at outrageous interest rates on top of your mortgage to get the job finished. As a rule of thumb, 10 per cent is as good a number as any for a reserve, but more is better.


The nasty surprises commonly encountered in a building project range from the bureaucratic to heavenly, if you want to blame God for bad weather.


Before a hammer even sees a nail, your local council can prove pernickety. For example, what I thought was going to be a fairly simple, small renovation project ended up involving a town planning consultant to file the DA, a second DA (with the attendant fees) after our architect made a mistake with measurements, a structural engineer, a drainage engineer, being sent back to the drawing board to solve council concerns about heights and privacy – we’re about to file our third DA.


Once work starts, you’ll discover the joys of “variations”. Unless you’re lucky and planned with extreme foresight and an eye for detail, issues will arise that require a change of plan or you’ll simply change your mind about the odd window or surface finish. Sometimes there will be a variation that saves you money – but not often. Less scrupulous builders have been known to quote for a job with no profit margin, relying on the inevitable variations to make a dollar out of it.


Delays happen. Weather can turn foul. Workers can get sick or injured. The coordination of different trades can go astray. Builders can stretch themselves thin to finish another job while working on yours. Whatever the reason, delays mean money, if only the cost of rent before you can move in, or there’s expensive bridging finance if you’ve borrowed for the new house but haven’t sold the old one yet.


It’s all annoying, but it’s easier to handle if you’ve budgeted to accept the unexpected to begin with.

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