A renovation affects areas of life satisfaction beyond finances – including family life, relationships, work, health and lifestyle. [iStockphoto]

What would a successful renovation look like – before, during and after?

As with any major financial decision, you need to understand how the renovation fits with your broader life goals. Why do you want to do it?

There’s a big difference between a “nice-to-have” new kitchen and a “must-have” modified bathroom for mobility needs.

Let’s say you’re choosing, rather than needing, to renovate.

Consider whether the choice is for capital gain at sale in the short term (up to five years). Flipping a property will incur transaction costs such as stamp duty and legal fees, so factor those into the overall cost. Can you still afford it?

Or are you looking to live in the house over the longer term? Will the renovation deliver lifestyle enjoyment over many years? For some, that may make a period of financial belt-tightening worth it.

It’s never just about the capital gain, increased floor space, amenity or privacy.

A renovation affects areas of life satisfaction beyond finances – including family life, relationships, work, health and lifestyle.

Have you done the sums?

You may have quotes from designers or builders. Check the detail including allowances for budget variations. Consider whether some changes – such as solar, good insulation and energy-smart design – may reduce bills over time.

How much risk can you stomach?

If you had a sudden shock to your income, expenses or health, how long could you cover all your expenses without having to sell major assets or go without lifestyle staples?

This may depend on a range of factors, including whether you have income protection or other insurances, and if you have a savings buffer.

One indicator of your risk is your debt-to-income ratio. Only you will know how much debt you can live with before it stresses you out so much it’s not worth it.

If you have determined your full project is too risky for now, you might consider doing the renovation in stages.

What expert advice can you get?

Seeking expert advice from architects, designers, landscapers, builders or project managers before and during the renovation can get you better value, less stress and fewer mistakes overall.

It’s vital you do your due diligence on the quality, reliability and cost of experts you enlist.

Choose someone who is easy to talk to, listens and understands your goals. The relationship with your build and design team will be crucial.

What role do my emotions play?

Almost every episode of renovation reality shows seems to feature an emotional breakdown and a massive budget blowout.

Emotions are an important consideration throughout your renovation. Financial decisions are never just about money.

If maintaining relationships and a healthy stress level is part of what a successful renovation looks like for you, plan ahead for that.

If that means moving into a rental for the renovation period, add it to the budget considerations.

Renovating can be exciting and exhausting, but beware of some of the common renovation decision-making biases.

One is the sunk cost fallacy, where the time and money you’ve sunk into the project so far can make it hard to change or abandon plans.

Even paying a small deposit can lead to an irrational reluctance to change course.

Then there’s decision fatigue, where mental energy gets depleted with each decision. It gets tempting to give in to whatever seems easiest at the time.

Be prepared to take more time to contemplate high-stakes decisions, and get advice, particularly in areas where you have no experience.

Getting the right advice at the right time over a renovation could be among the most important financial decisions you ever make.