Completing the wrong renos at the wrong time can have more of a financial impact than you think
It’s hard to watch so many people struggle with massive amounts of debt because of the stories they are telling themselves about the ‘need’ for home renovations. And of course those stories are reaffirmed by channels like HGTV and Magnolia network, where there is a never ending supply of shows making what people affectionately call ‘real estate porn.’ But let’s really talk about renovations and why they can be devastating financially.
Stop telling yourself you are ‘forcing equity’ in your home
Are you? Maybe. Will you get more buyers with hardwood than carpet? Probably. But are you selling? If you are making improvements to your home, and you intend to live there long term, you really aren’t doing anything short term except spending money. What will those floors look like in 10 years? Will the semi custom cabinets you bought still be in style? The average life of a reno these days is 5–7 years, so what would that equal value of money invested in blue chip dividend paying stocks be worth in that same period of time? There is an opportunity cost to renovating now which may not be as lucrative as you thought, so just be aware of that when you are choosing your hand scraped, wide plank, walnut hardwood.
Be honest with yourself about what kind of renovation it is. It’s either a vanity play, a life improvement play, or a strategic move to improve your home for sale. Unfortunately, people have been prioritizing the vanity play way too often.
Sure I wish my house was prettier, but what I actually needed was a more economical way to heat my house. Baseboard heating in the winter was costing me $400 a month, so basic math allowed me figure out the cost benefit of installing a heat pump. Would it shock you to know that I have never once looked at my Fujitsu heat pump and thought: What a beauty! And yet, it has improved the quality of our lives in all seasons more than I could say. And I can hear it now: “Oh but having the California closets will improve my well being.” And if this is the story you tell yourself, that’s fine. But incurring crushing debt because you want high end clothing storage, is not really the same thing as efficient and cost effective heating is it?
If you are financially secure, do what you want. But if you are like the rest of us and just trying to find a nice balance of some wants and needs, try and plan your renovations like this:
Things which improve the health and wellbeing of your home and the people in it (Think upgraded electrical or plumbing systems)
Things which optimize the function and efficiency of your home (Upgrading your heating system to a more efficient one, or improving insulation or windows)
Pretty stuff (Nuff said)
The first two are worth doing in short order, and may also be worth financing over time, but the last one…..don’t shoot the messenger, is only worth doing if you have cash in hand. But guess what, when you actually come up with a strategic renovation plan, and you aren’t reacting to situations which inevitably come with home ownership, that means you can shop wisely, take advantage of rebates and programs, and save some money doing DIY. Then in time you will be able to afford the little luxuries which make your house a home, without the crushing debt from trying to keep up with the Joneses. So take care of your home, take care of yourself and your family, and start telling yourself a different kind of story about what it actually means to be successful, and not just look that way.
Show me a person who has money and no desire to impress anyone, and I’ll show you a rich person.
At The Project Garage, we are making it easier for you to complete your DIY projects by giving you access to vetted trade professionals who can offer remote advice to you when you get stuck.
Originally Published on Medium November 29th, 2022
© Stephanie Paraskevopulos 2022
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