Why the Renovation Budget Is Never, Really, the Real Budget — A Psychologist and Top Project Managers Break It Down
Going over budget when renovating is surprisingly common — to ensure your own project stays on track, we asked a leading psychologist and experienced project managers for their advice
From personal experience, I can truly say that the renovation projects I have carried out have been some of the most exciting and rewarding parts of my life. In the same breath, however, I'd also point out that they have been amongst the most financially and, subsequently, emotionally draining too.
While living on site with kids while renovating contributed to the stress, so too did the overspending. The budget — which was hazy at best to begin with — just kept getting stretched. According to the 2026 UK Houzz & Home Report, I am not alone in failing to stick to my original financial plan. The report found that 38% of homeowners exceeded their initial home renovation budgets, while only 3% of renovators completed their project under budget — and approximately 26% started their renovation with no set budget at all.
To get to the bottom of all this overspending, I spoke to a leading psychologist as well as a couple of experienced project managers who explained to me the leading causes of going over-budget — as well as the steps renovators can take to remain in control of their finances while enjoying the experience of creating their dream home. Here's what you need to know.
1. Set a Realistic Budget From the Offset
Setting a realistic limit for your budget and being upfront with your project manager about what that is should ensure everyone is working toward the same goal.
It sounds so simple, yet it is surprising how few people actually sit down and set a firm budget for their project, be that a renovation or extension. Shamefully, I am one of them — rather than having a fixed amount to spend, we just kind of took a 'pay as you go' approach, which, as you can imagine, meant we overspent horribly.
According to Dylan Gould, founder and director of design at Cargo Workshop, when setting a budget, some really honest, perhaps uncomfortable, conversations need to happen. "Overspending is usually a clarity problem. Homeowners sometimes hesitate to share their actual budget, believing that by lowering the target, they’ll protect their investment. But that muddies the water for the design process. A budget is as much a design tool as a Pinterest board is. Knowing the parameters lets the design team help the homeowners understand where spending will actually change the experience within the home and where it won’t."
"A strategy we use to solve this is to test costs while the design is still active," continues Dylan. "The traditional project process is to design the entire project, bid it, experience sticker shock, redesign it, and re-bid it. We’d rather have some of those uncomfortable conversations while the ink is still wet. It’s much simpler to erase a part of a drawing than to move an entire wall filled with framing, electrical, and plumbing. In a design-build process, decisions are made with the desired outcome in mind, rather than designing the dream first and then cutting pieces away to make the spreadsheet work."
NYC-based neuropsychologist Dr. Sanam Hafeez, founder and director of Comprehend the Mind, agrees that having a set figure for the renovation before any work gets underway is key to staying on budget. "The best thing you can do is decide on a firm budget before the project starts and be very clear about what that number includes. Give yourself a number you will not go beyond."
Dylan has worked in design for more than 20 years. As a licensed architect and Director of Design, he leads the strategic planning and design on Cargo Workshop’s projects, from first sketch to finished detail. He walks into a space already thinking about what it should become.
Dr. Sanam Hafeez is a New York City based Neuropsychologist and School Psychologist. She is also the founder and director of Comprehensive Consultation Psychological Services, P.C. She is the author of the book Clinical Perspectives on Recent Trends in Autism Assessment, Diagnosis, and Treatment.
Dr. Hafeez graduated from Queens College, CUNY with a BA in psychology. She then went on to earn her Master of Science in Psychology at Hofstra University. Following that she stayed at Hofstra to receive her Doctor of Psychology (Psy.D.) She later completed her post-doctoral training in Neuropsychology and Developmental Pediatrics at Coney Island Hospital.
2. Do Nothing Until You Have a Clear Plan
To avoid costly changes later down the line, make sure you know exactly what you want before any work begins.
In all the excitement of getting started on a renovation project, it is all too easy to rush the planning stages, yet it is this stage that determines how likely you are to be successful in sticking to your budget.
As Anna Vasiltsova, founder of Anna Design LA, an architectural interior design studio in Los Angeles, explains, "I'm currently building my own home and ADU, so I'm going through the budgeting process as the designer and the client at the same time. My biggest piece of advice on budgeting? Plan it first, build it after. Everything needs to be planned on paper first — and precalculated. What exactly are you doing? When you know that, you will be able to stay within the budget. This is the most important rule."
"When you don't have a plan, that's where you start having a lot of extra spending," continues Anna. "Homeowners overspend because they only have half a plan — or sometimes because they don't have a plan at all. So they are just going with the flow, then later they find something better or something different and try to change it. Or they have an 'open budget', start spending, and then realize they are going way above the figure they set. It's simple — no plan in the beginning will leave you overspent."
Dylan Gould also highlights how early planning allows you to prioritize and break the project into stages. "Renovations are ultimately a series of consequential decisions, and the design phase is the place to weigh up which consequences are worth it," he says. "It’s also worth designing around what can be changed later. You can always install the beautiful chandelier or stand-out kitchen lighting next summer, but the wiring needs to happen now."
"Emotional stress comes when homeowners feel surprised or trapped by decisions they didn't fully understand when they made them," adds Dylan. "That’s when excitement turns into anxiety, resentment, or decision fatigue. Spending more than you originally anticipated can still feel like a good decision if you understand what you’re gaining in return and have consciously chosen the trade-off. The goal shouldn’t be to spend the least amount possible — it should be to avoid surprises and spend deliberately on the things that matter most."
Anna Vasiltsova is the founder and principal designer of Anna Design LA, an architectural interior design studio in Los Angeles working on high end single family homes. She was named to the Los Angeles Times Hot Property 40 Under 40 in 2023. She is unusual among designers in having designed, built, and managed construction on her own home and ADU from the ground up, handling everything from layout and finish selection through insulation, waterproofing, and soundproofing. That dual perspective, designer and builder, means she can speak to both how a space should feel and what it actually takes to execute it, including what goes wrong on site and what things really cost.
3. Have a Contingency Fund With a Clear Purpose
Make sure you have a contingency fund in place for completely unavoidable extras or unknowns.
A contingency fund should really be non-negotiable during a renovation project, or even when remodelling a small kitchen — it will prevent the project from grinding to a halt in the face of unexpected yet unavoidable expenses and gives peace of mind as the project progresses, too.
Whitney Hill, a licensed general contractor and CEO of SnapADU, suggests organizing your budget into distinct categories to prevent overspending. "The best protection is to divide the budget upfront into three buckets: committed scope (what you have actually decided to build); contingency (money reserved for true unknowns); and optional upgrades (the things you'd like, but can cut without compromising the project.) The mistake is letting the contingency become an upgrade fund."
"I'd also set a clear scope-freeze point," continues Whitney. "After that, every new idea has to replace something already in the budget rather than simply adding to the total. Otherwise, a series of seemingly small decisions can turn into a very large overrun."
Dr Sanam Hafeez wholly agrees that a contingency fund is vital to keep a project on track financially. "Renovations rarely go exactly as planned. Decide ahead of time which things are most important to you and which upgrades you can/cannot live without," she says. "Once work begins, it can be tempting to think, 'It’s only another £500,' but those smaller decisions can quickly add up. Try to avoid changing plans halfway through the project unless there is a real reason to do so."
Whitney Hill is the co-founder and CEO of SnapADU, an accessory dwelling unit design build general contractor serving San Diego. SnapADU has become the leading builder of ADUs in San Diego as part of a broader shift in how California is thinking about generating affordable housing. Before getting involved in residential real estate Whitney earned a bachelor’s degree in Psychology from Yale University, as well as an MBA from the Stern School of Business at NYU with a specialization in Entrepreneurship and Management of Technology & Operations.
4. Try To Not Let Emotions Over Rule Good Sense
Try to avoid letting your emotions get in the way of sticking to your budget — the psychological fallout can be significant.
Renovators tend to fall into two categories — those that are simply aiming to make a quick profit before moving on and those designing a forever home, with a view to living in it for a good chunk of time. If you fall into the latter category, you may well find yourself letting your emotional attachment to the house cloud your good financial judgement.
"A home is very emotional for people, so decisions about it are not always made based on money alone," picks up Dr Sanam Hafeez. "They picture their family living there, entertaining friends, or finally having the kitchen or backyard they have always wanted. Once they become attached to that picture, it can be difficult to scale it back."
"Social media can add to the pressure because people are constantly seeing beautiful homes and renovations that make their own space feel inadequate," adds Dr Hafeez. "Whether it is worth it really depends on what someone can comfortably afford without sacrificing their financial security."
5. Avoid the "We've Already Spent This Much..." Trap
Once you have already sunk a considerable amount of money into a renovation project, it can be tempting to just keep going.
We've all been there (I certainly have anyway) — you've got so used to pouring money into your renovation project that it can become really easy to think 'what does a little more matter?'
According to Whitney Hill, this is a common cause of going over budget. "Once someone has already committed six figures and months of disruption to a project, another few thousand can start to feel insignificant in isolation. That's where homeowners can get themselves into trouble. Each individual decision feels reasonable, but the cumulative total isn't."
Joe Matejka, founder of Walk Your Plans, fully understands the emotional connection homeowners have with their project, but also points out the effect this can have on their budgets. "Buying a home is a very emotional purchase. It’s where you’ll raise your family, celebrate holidays, and spend a significant part of your life. This emotional connection causes budgets to become flexible because people say to themselves: 'If we're already doing this, we might as well...'".
"Those extra costs might not seem significant at the moment, but they compound quickly," continues Joe. "And the few thousand here and upgrade there means that suddenly the project looks extremely different from what was originally planned. Are the decisions intentional or reactive? It’s worth it if it’s intentional, and it usually isn’t if it’s reactive."
Joe Matejka founded Walk Your Plans after experiencing firsthand the disconnect that can happen between blueprints and reality while building a large investment property. After realizing the home’s 'great room' was far smaller and less functional than envisioned once construction was complete, Joe set out to create a better way for homeowners, developers, and designers to experience spaces before they are built. Joe launched Walk Your Plans with the goal of helping people make smarter planning decisions through immersive, true-to-scale walkthrough technology.
The Real Impact of Overspending on a Renovation
Sticking to your budget might feel like you are compromising but, overall, it results in a less stressful renovation experience.
Whether you are budgeting for a bathroom remodel or renovating a home for life, it seems that the main causes of renovation overspends are a combination of poor planning and emotional attachment to a property. Once you are aware of this, it should, theoretically, be easier to catch yourself in the act of either — but if you still find yourself pushing your budget's boundaries, understanding the psychological impact it can have might help.
"Financial stress has a way of following you around because money affects so many parts of everyday life," explains Dr. Sanam Hafeez. "Someone may start feeling anxious every time another bill comes in or another unexpected expense appears. It can also cause regret, especially if they begin wondering whether the renovation was really worth what they spent."
"People may become irritable, have trouble sleeping, or find themselves thinking about money throughout the day," continues Dr Hafeez. "Overspending can also create tension between partners. In some cases, the home that was supposed to make someone happier can actually become a reminder of the debt or stress they are carrying."
"Financial stress takes away the most rewarding experience and instead of enjoying this process, homeowners find themselves second-guessing every decision, arguing over priorities, and wondering whether they should cut corners to make numbers work," adds Joe Matejka. "I’ve also seen decision fatigue become a real challenge — by the time people are making their 100th decision, they're mentally exhausted, and that is when rushed decisions happen. The ones people regret the most."
While living on site while renovating might sound like a good way to keep a budget under control, it is vital to ensure that by doing so, you are not slowing the process up by getting in the way of any contractors or trades trying to get their jobs done quickly and efficiently — good communication is key.
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