Planning a Reno? Why You Should Look at Your Debt FirstMay 23, 2018
Before you borrow money to renovate your home, have you stopped to think about your long-term financial goals? Have you taken into consideration your existing debt and your long-term savings?
There’s no question that renovations are a popular summer spend for Albertans. According to our home renovation poll from 2017, Alberta homeowners were expected to spend more on renos than any other province: an average of $22,586, or twice as much as homeowners in Saskatchewan.
It’s important to consider financial challenges like debt, though, before you commit to a renovation. Will taking on more consumer debt for a reno negatively affect your long-term financial goals? Will a renovation affect your ability to repay your existing debt?
Obviously, there’s only so far you can stretch your paycheque. Our poll found that 24 per cent of homeowners intending to renovate were willing to put off paying down debt as quickly as they could (or should) in order to renovate.
What are your financial goals? It might seem like a simple place to start, but write down your goals first. Now, put that list of goals somewhere that will help you keep them in mind — like the desktop of your computer, or even on your refrigerator door. This is a great thing to reference when you’re considering a big spend like renovations.
You can track your progress too. The Financial Consumer Agency of Canada (FCAC) has a goal calculator that can help you plan for debt relief or set new savings goals.
Retirement is one of those savings goals that should always be a priority, but that’s not always the case. According to results from a just-released poll, one in four Canadian Gen Xers have nothing put aside for retirement.
If you’re finding it difficult to save for retirement, think twice about embarking on home renovations. Don’t assume that renovations will impact the value of your home, as other changing factors can come into play over the years — neighborhood, nearby businesses, and more.
You want to always be thinking about the big picture when considering a big spend like renovations — consider all the pros and cons. An expensive new kitchen or a fabulously landscaped yard now isn’t worth financial stress down the road.
For more things you should know before you reno, listen to this podcast with advice from our Licensed Insolvency Trustees (LITs).