Your budget should be shaped by what you can and want to spend—not just by what your project could cost.
Start With What You Can Spend
You don’t need final plans or contractor bids to begin building a construction budget. In fact, the earlier you set your spending expectations, the smoother your project will go.
This isn’t about predicting every cost, it’s about building a working framework based on what’s financially comfortable for you. That framework will guide your design, help you communicate with professionals, and keep your goals grounded in reality as the project evolves.
Step 1: Define Your Financial Capacity
Start by answering a simple question: how much are you willing and able to spend on this project?
This number should include:
- Personal savings allocated to the project
- Construction loan, refinance, or HELOC approval
- Any additional sources of funding or financial contributions
If you’re not sure of the exact number yet, define a comfortable range (for example: $350,000 to $450,000). Be conservative, don’t plan to spend every dollar of what’s available. Leave room for flexibility and contingency.
Step 2: Understand What “Total Project Cost” Really Includes
Your total budget will cover more than just construction labor and materials. To make sure your expectations stay on track, it’s helpful to group costs into five main categories:
1. Design & Engineering
Architectural drawings, structural and civil engineering, land surveys, energy reports, soil tests, and any required consultant work.
2. Permits & Approvals
City planning reviews, building permit fees, Title 24 (or equivalent), zoning applications, and related agency processing costs.
3. Sitework & Utilities
Any work needed to prepare the land or tie into services. Includes grading, drainage, trenching, retaining walls, utility connections, tree removal, and access improvements.
4. Building Construction
Everything related to the physical build: framing, insulation, roofing, mechanical systems (MEP), drywall, windows, siding, finishes, cabinetry, painting, flooring, etc.
5. Contingency
Funds reserved for the unexpected: design revisions, price increases, scope changes, or hidden conditions once construction begins. A typical contingency is 10–20% of the total project budget.
These categories help you stay focused on the full picture, even if you don’t have final quotes yet.
Step 3: Set a Target Range for Construction
After accounting for design, permitting, sitework, and contingency, what’s left for actual construction?
This is where your cost-per-square-foot research becomes useful. Based on your remaining budget, compare it to average build costs in your area to get a feel for:
- How much space you can afford to build
- What level of finish is realistic
- Whether your scope needs to be scaled down or phased
This exercise isn’t exact, but it’s a helpful reality check, especially before design begins.
Step 4: Align Scope With Your Budget
Once you have a target spending range, make sure the professionals you hire are working toward it from the start.
Too often, people wait until design is finished to find out what it costs, and then have to cut back or rework the plans. Designing to a number means fewer surprises and a better end result.
If your scope, site, or goals push your budget to its limit, consider:
- Reducing square footage
- Phasing construction
- Simplifying shapes or finish selections
- Prioritizing structural work over cosmetics
Step 5: Plan for the Unknowns
Every project encounters surprises. That’s why your budget needs a contingency.
We recommend holding at least 10–15% of your total budget in reserve. This can cover:
- Design changes midstream
- City correction comments
- Code-required upgrades
- Material price increases
- Unforeseen issues during demo or excavation
Think of contingency as breathing room, not as money you plan to spend, but as protection from delays or panic decisions later.
Step 6: Build Your Own Working Budget Summary
Use the questions below to sketch out your own high-level project budget. This doesn’t need to be detailed—it just needs to reflect your comfort zone, financial capacity, and expectations.
Budget Planning Questions:
- What is your maximum comfortable spend for the entire project?
- How much funding is available through savings, loans, or equity?
- How much of your total budget will you allocate to:
- Design & Engineering?
- Permits & Approvals?
- Sitework & Utilities?
- Construction?
- Contingency?
- Do you have other costs to plan for?
- Appliances, furniture, or fixtures you’re buying directly?
- Landscaping or exterior improvements?
- Temporary housing or storage?
- What matters most to you?
- Timeline?
- Finish level?
- Size?
- Staying under budget?
Answering these will give you a strong starting point, and something you can share with your team when it’s time to move forward.
What’s Next: Budgeting Tool
You now have a working structure for your budget. The next step is to plug in some numbers, test a few scenarios, and see how things shift based on your priorities.
Head to the Budgeting Tool to start shaping your budget using the categories from this page, and get a better sense of how far your money will go.