It’s normal for anyone to not know what’s the appropriate budget to assign to a purchase, especially when they’re venturing into something new. Cars, hosting a wedding, renovation. Cost comparison, asking advice from experienced friends and/ or family members, and checking out what you can afford is usually a good start.
For home renovation, there are also widespread guidelines that advises against spending over a certain percentage of your home price. I’ve heard figures from 10-30% depending on types of property, or usage (whether for investment or own stay).
I feel that this concept, while provides a good platform, is also flawed in its essence. Here’s what it doesn’t take into account:
Context in this case refers to the location and type of property. For example, you may need to spend more to renovate an landed house compared to an older condominium unit, both being the same size.
Even for new properties, there are more possibilities, design to play with and things to add and sort out in a landed home.
A 1,200 sqft condominium unit in Aria Residence KLCC costs RM1,680,000. A unit of the same size in Irama Wangsa, Wangsa Maju is RM695,000.
If we use the said guideline, say 20%, it will be RM340,000 vs RM140,000 of renovation for, probably for the same amount of things, necessity. Yes the former does enable you to have more 'nice to have items', but I guess the point is to get to the necessary budget to get things done.
Material and/ or labour costs doesn’t care where is the location of your home. A kitchen of the same size (with the same vendor) costs the same whether you’re in Puchong or Mont Kiara.
So using the percentage method may severely limit your renovation possibility if you’re in the outer part of town, and encourage you to spend over the top (though no question about affordability here) if you are living next to KL Pavilion.
What you actually need to get done. When we start off with what you ‘should’ spend, more often than not there will be a bigger gap between that and what you actually need. It may be harder to actually compromise and come in between as there is too many things to consider simultaneously.
What next then? Whether it’s with home renovation, or meals, or shopping for baby necessities, I always start off when what I need. From there then it will be easier to look for vendors that can cater to my need, to my budget. And if my needs and budget doesn’t see eye to eye, that is when I prioritise and trim my needs, or defer it to phase 2.
This will be more methodical than to follow a subjective and ‘says who?’ guideline. It’s specific to my situation and needs.
Would it be easier and more fulfilling to decide on your ideal holiday destination and trim down the luxury (airbnb instead of hotels, train from airport instead of cab)? Or would you instead rather see how much you can afford based on a percentage of your salary/ savings and decide the destination from there?
