There are two main reasons for busted budgets: changes and "whileyas" (that handy little phrase that often spills out of a homeowner's mouth, "While you're here, could you just..."). Here is how to handle both:
Determine how changes will be handled before the project starts and include the procedure in the contract. This will help keep change orders to a minimum.
Realize that any work not specified in the original contract will have an additional cost attached to it. Contractors find that "whileyas," can represent up to 10 percent of their total annual volume. If you do find additional work you would like your contractor to do, by all means discuss it with him or her. However, you should approach the "whileya" job as a new project and ask for the contractor to draft another project plan and contract for that particular job. This will prevent you from making an uninformed decision, and also give you time to carefully consider the new project.
Remodeling often has a domino effect which causes "Whileyas" to happen: You see one room being transformed and decide that the room next to it doesn't match anymore. Next thing you know, the hallway looks dingy and needs some fixing of its own. And so it goes throughout the house. This phenomenon can turn into an enormous budget buster if not kept under control.
Finally, stick to your original plan. If you decide that your budget is "x" and your reserve fund is "y," tell your contractor to work within those figures. It is easy to say, "A little more on this faucet won't matter. It's a small amount of money." Unfortunately, this is a close cousin to "whileya" and another easy way to overextend your budget.
