This week’s report explains how to avoid the biggest pitfall awaiting uninformed homeowners.

Most homeowners start renovations by hiring a designer or architect to draw up the plans. Next, they call contractors and hope their estimates come in on budget. This is probably the surest way to cash problems.

If you find yourself in this category, you’re not alone... but how do you get yourself out of it?

Even when preliminary estimates are on budget, final bids are often substantially higher... which is mainly due to the fact that initial plans contain far too few details. As a result, contractors estimate by using standard formulas, based on standard materials at average per-square-foot prices.

The answer is to set a budget before plans begin. Set it at the maximum level you are willing to pay and include everything in it. Then let everyone you’re working with know what it is.

2. Design to that budget.

The fact is that the majority of renovations are over-designed right from the start... and no amount of management efficiency will bring their cost back into line. Having design matched to budget from the very beginning is the only way to save money and dreams. It’s no fun having to scale-back an over-budget plan after drawings are complete and you’ve already fallen in love with the design.

Work it all out on paper beforehand. More than just a floor plan, you need a master plan. Include the walls, the ceiling, the light fixtures and all appliances. Include everything you want and price it. Then add or subtract ­ or adjust item costs ­ to meet the budget you’ve set.