Bathroom Planning: Don’t send money down the drain during your bathroom remodel. Expert contractors and bathroom designers help you get the most out of your bathroom budget.

If your plan is to turn a master bath into a spa-like retreat, but the mere mention of money brings on an outbreak of hives, take heart. Figuring out the financials for a bathroom remodel doesn’t have to be a stressful experience. We’ve outlined the steps you need to take to keep your finances in line.

 RUN THE NUMBERS

The national average cost for an upscale bathroom remodel is roughly $26,052, according to Remodeling Magazine’s 2005 Cost vs. Value report but how much a homeowner actually spends will vary. To find that magic figure, first conduct a thorough and honest examination of your finances to reveal how much you can spend. The National Association of the Remodeling Industry (NARI) offers a budgeting worksheet that makes this easy to do.

Next, look at how many more years will be spent in the home. “I have a flexible rule of thumb,” says Everett Collier, president of NARI and co-founder of San Francisco-based remodeling company Collier Ostrom. “If a person is going to stay in a home for five years or less then the improvements should be viewed as improvements on investment. If you’re going to be there for a longer period of time, you want to look at what’s going to make you and your family the most comfortable.”

Consider what a remodeled bath will do to a home’s value, and then compare that figure to prices of other homes in the neighborhood. “That will help you determine what you’re going to spend [and] whether you’re going to over-improve your property,” Collier says.

 WHAT TO ADD — AND CUT

When budgeting for a bathroom, don’t forget to allow for labor, which usually ends up being approximately a third of a project’s cost, says Jeff Cannata, president of Designer’s Showcase Kitchens & Baths Inc. in Carol Stream, Ill., and past president of the National Kitchen and Bath Association (NKBA). If the budget needs a trim, the first things to cut are the extras — little luxuries that would be nice, but aren’t essential to the room’s function like a towel warmer or a steam shower.

 HAVE A CUSHION

When it comes to plumbing, there can be all sorts of budget-busting surprises lurking behind the walls and floors of a home. It’s wise to set a bit of money aside for problems that might arise. Last minute changes, called “change orders,” cost time and break budgets too, so give careful consideration to any mid-project revisions. To cover potential problems and likely change orders, Cannata recommends setting aside 10 percent of whatever number has been budgeted for labor costs. The good news is, if the financial cushion isn’t needed, there will be money left over at the end of the project for towel warmers, fluffy towels or other luxuries.

HOW TO PAY?

There are many ways to foot the bill for a bathroom remodel, but a home equity loan may be the most popular because it can be tax deductible. Other options include refinancing, no-equity loans, FHA loans, personal loans, loans from retirement plans or borrowing against life insurance policies — and, of course, your own savings. Whatever the type of financing, make sure to shop around for the best rate. Even if cash is in hand, oftentimes borrowing at a low-interest rate makes more financial sense than pulling your money out of an investment account that’s yielding a higher rate of return. “Sometimes it’s smarter to use someone else’s money than your money,” Cannata says.

 STAYING ON BUDGET

Once the financials have been finalized, don’t tuck the budget away in a file. Use it as a tool — whether it’s a computerized spreadsheet or two columns on a piece of paper — to track actual spending against budgeted amounts. You’ll be less likely to authorize expensive change orders when you can see the affect it would have on the project’s cost, and doing so will ensure your budget is in the black at the end of your remodeling project.

From HGTV, by Alicia Garceau

Read the article on HGTV’s website.