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A sense of scope. How to make a budget and stay within it

By christian / Thursday, 22 February 2018

A sense of scope. How to make a budget and stay within it

It is an unfortunate habit of humans that the more we see, the more we want.

So, the more homes we take a look at, the less willing we are to settle for what we originally had in mind, especially if it was poorly defined in the first place – now we want the big thing, the shiny thing, the cool thing because we never said it WASN’T in the plan.

Thus begins what managers call ‘scope creep’.

Scope creep

When a project is not clearly defined and committed to paper, our minds start to inflate what we were after in the first place, and will begin to justify extras that weren’t in the budget as if it were a mere oversight that we left it out.

Even when the plan IS properly documented, you need the strength to resist adding to the plan. You need to go back and refer to the documents, and submit to the plan and budget that you built for yourself.

So, two pieces of advice:

1. Plan very specifically.

‘A large living room’ is not clearly defined. How big is it, really? ‘A nice balcony’ – in what way ‘nice’? Do stairs lead from it? How much is the budget for this one item?

As you may be first time home-builders, I strongly recommend recruiting professional planners to help you. They will ask all the pressing and probing questions that never even occurred to you.

They will also know far better than you what the cost of building each feature would be, and can confirm these costs soon after your meeting with them.

The next part is entirely you:

2. Stick to the plan.

That plan, that document, becomes your law book and code of honour – adhere to it, stick to it, do not waver from it. Your financial life may depend on this.

Assumptions and risks

Assumptions and risksTwo project manager terms. Every plan is built on assumptions, and every assumption comes with a risk that that assumption is not accurate.

Assumption is not hope, not wishing for the best, it is an estimate of the reality that there will be so many construction days washed out, so much supply cost and so many obstacles in the path of building.

This more specific you state your intentions, the narrower that gap of assumption. Do you KNOW what time of the year you intend to build? That will affect cost through weather and suppliers.

How much ‘risk’ is on each assumption is estimated in planning, and the chances of mishaps and their costs are factored in. There is a chance that the cement will arrive on time but that the foundation dig was delayed. What are the chances and how much will that cost? Is it worth extending the build time to avoid it?

Budgeting on a reasonable-case-scenario with contingencies built in can save you a lot of stress when the project is running.

But it starts with a robust plan. Plan for scope, know your assumptions, balance for risk, and stick to the plan.

Happy building.

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