If your "budget" isn't a budget, how can you control your money?

Photo by Kelly Sikkema

Sometimes what you're calling a budget isn't a budget. It's an estimate or a "guesstimate." Why should you care? Not for the sake of semantics, that's for sure. 

You should care about the difference between a budget, guesstimate, and estimate because you want to be smart with your interior design dollars. Maybe you want to economize in one area so that you can splurge in another. Perhaps you're planning to sell your home and want to maximize your profit. And don't you want a good deal?

First, what is a budget? I like this definition from the New York State Society of CPAs. It's short but it covers all of the essential elements. A budget is a "financial plan that serves as an estimate of future cost, revenues or both." 

Let's break that down:

• A budget is a plan. Plans are detailed, concrete, and complete.
• It calculates future costs: furnishings and fixtures themselves plus the cost to transport and install them.
• It accounts for future revenues: the total amount of money you will need and where it will come from.

A budget is not someone's best guess or "guesstimate" - even if that someone is an expert guesser like an architect, designer, or contractor. Guesstimates are useful very early in your interior design project. Let's say your contractor says, off the top of his head, that you'll need $150,000 to build the kitchen you've described to him, but y only want to spend $50,000. His guess might be off by quite a bit, but $100,000? No way. You know, before you're knee-deep in the design process, that you have to scale back your dream or spend more money. 

Estimates for remodeling and renovation projects are more accurate than guesstimates, but they're not as detailed, concrete, or complete as a budget. Your builder might meet with you and put together a short estimate based on that meeting. Or, you could use a formula, like average cost per square foot to remodel a kitchen, to estimate your cost. An estimate, like a guesstimate, is a good reality check.

A budget, on the other hand, is a detailed and complete list of everything that goes into your new room. It includes the cost of materials, shipping, delivery, and labor plus a contingency fund. You build your budget after you have finalized your design plan. (More on creating a design plan here.) You share your design plan with your contractor so that he can give you accurate labor and building material costs to plug into your budget. 

To make a long blog short: a budget puts you in control of your money.

Creating an actual budget for your project will put you in control of your money and help you achieve the room of your dreams.