The 10% Rule: Why Your Renovation Contingency is Your Best Friend

What Exactly is a Contingency Fund?

A contingency fund is a dedicated slice of your budget set aside to cover unforeseen costs. It is not for "upgrading" to a better marble countertop halfway through; it is for the things you can't see until the walls come down.

Why 10%?

While 10% is the industry standard for new builds or straightforward renovations, experts often suggest 15% to 20% for older, historic homes. The older the house, the more "surprises" it tends to hide.

The "Wall Surprises": Where the Money Goes

Once demolition begins, the "Knowns" quickly meet the "Unknowns." Here are the three most common budget-killers that a contingency fund handles:

1. Structural Skeletons: You might find termite damage in the joists, a cracked foundation, or a load-bearing wall that wasn't marked correctly on the original 1970s blueprints.

   
   

2. Outdated Systems: Opening a wall often reveals "creative" DIY wiring from a previous owner or lead piping that must be replaced to meet 2026 building codes.

   
   

3. The "While You're At It" Factor: Sometimes, the contingency covers a logical pivot. If the floor is already ripped up to fix a leak, it’s often cheaper to replace the subfloor now than to wait five years.

   
   

The Psychological Edge: Peace of Mind

Renovations are notoriously emotional. When a contractor tells you that your subfloor is rotting, your reaction depends entirely on your budget:

• Without a Contingency: You feel panic, anger, and the urge to cut corners elsewhere (like buying cheaper fixtures) to make up the gap.

  
  

• With a Contingency: You simply say, "That’s what the 10% is for. Let’s fix it properly."

A contingency fund transforms a "disaster" into a "scheduled adjustment." It keeps your relationship with your builder professional and your stress levels manageable.

How to Manage Your 10%

To make this rule work for you, follow these three steps:

• Keep it Separate: Don't let the 10% sit in your main checking account. Put it in a high-interest savings account so it's "out of sight, out of mind" until it’s needed.

  
  

• The "End of Project" Reward: Tell yourself that if you don't spend the contingency, that money goes toward new furniture or a celebratory housewarming party. It’s a powerful incentive to stick to your original scope.

  
  

• Get an Accurate Base Estimate: A 10% buffer is only helpful if your starting number is realistic. Use a professional building estimator tool to ensure your "100%" is accurate before you add the "10%."

  
  

Final Thought

In building, the only certainty is uncertainty. By embracing the 10% Rule, you aren't planning for failure, you’re planning for reality. You wouldn't go on a road trip without a spare tire; don't start a renovation without a contingency.