Whether you’re renovating for investment purposes or to get more out of your home, home improvements are on the mind of almost all homeowners. But before considering all of your transformation options – kitchen first? Bathrooms? Landscaping? Addition? – you should think about how you’ll finance the project.

Before rushing to the bank for a home improvement loan, consider financing this new adventure by saving up for it.

Saving up for a major or minor renovation is smart for a few obvious – and not so obvious – reasons.

• No interest, loan fees or closing costs. Obviously, the banking industry makes money when you want to do something for which you don’t have the cash. If you do have the cash, you don’t need to pay someone else to finance your adventure.

• No diminution in your credit score. Depending on whether you opt for a home equity loan, line of credit, mortgage refinance (with cash out) or unsecured loan, your credit rating may take a hit. If you pay for your home improvement project with cash, there’s no risk of unpleasant surprises next time you check your credit score.

• No debt. Debt can be a useful tool for building credit, but not when you max out cards to fund a kitchen renovation. Be smart about how you use credit cards to boost your credit and leave the big purchases to your savings account.

Ways to Save Up

Once you’ve decided to save up and pay cash for your project, it’s time to get creative to build that savings. Before you start applying for weekend jobs, sit down with your budget and a record of the last six months’ worth of living costs. According to Bea Sheets, a northern Virginia homeowner whose recent dream-bathroom overhaul was just completed last week, finding ways to save isn’t impossible. “Save all the change from anything that is purchased,” she says with a smile. “Round it up and put it aside. Also, any surprise cash gift or credit that comes in, save it.”

Sheets says that to make the sacrifice worth it, focus on saving on household expenditures like heating and cooling. “Throw a sweater on in the winter months and buy yourself a cooling mister and box fan in the summer,” she says. “Sell furniture online – things that you won’t be using in the newly remodeled area.”

Little reserves add up over time, especially when you combine your methods of saving. Try a combination of some or all of these savvy ways to save at home:

• Install a programmable thermostat.

• Turn down your water heater.

• Replace air-conditioning filters at least every 4 weeks.

• Haul your weekly trash to the dump instead of paying a private collection company to do it for you.

• Use SmartStrip Surge protectors so electronics and appliances don’t use electricity while turned off.

• Switch to LED light bulbs… as in, yesterday.

Once you’ve saved up for the project of your choosing, it’s time to keep that cash where it belongs – that means vetting contractors thoroughly, doing what parts of the project you can by yourself, and negotiating the labor and material costs of whatever portions you need to outsource. Another way to make that savings go further is to read up on the tax breaks or rebates you may be eligible for having improved your main home.

If your goal is to enhance your own living space or spruce up your real estate investment by way of home improvements, cash is the least expensive option. Whether a new front door, deck, or simple paint job, cash really is king.

Image Source: Flickr

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