Whether you are planning on taking the burden of the yearly budget upon the shoulders of your HOA board, or you plan to get the assistance of an HOA management company, the annual budget is one of the most important items on the agenda of any homeowners association. Here are seven considerations that should be included in the planning of your annual HOA budget.
Start Planning Early
It is never too soon to begin thinking about the next year’s budget. Most HOAs begin thinking about the following year at the end of the summer. During the late spring and early summer months (or even earlier), a special meeting for the next year’s budget should be placed on the schedule for the late summer or early fall in order to guarantee it is not left until later.
Boost the Reserve Fund
The budget should always be created in order to save more money in the reserve fund. The reserve fund is important as it anticipates major and minor unexpected costs that would otherwise hurt the budget. It is good to put between 15% and 20% of the budget into the reserve fund yearly.
Plan Special Projects
Spend time planning which special projects will be done the following year and which can be put off for a later time. Try not to schedule too many special projects at one time to avoid imposing excessive fees on homeowners.
Calculate and Include Insurance Deductibles
Be sure to include the deductible amounts for all of your insurance plans in the budget. In so doing you can avoid using money that should be used for unexpected repairs instead. Do not dip into the reserve fund for these deductibles.
Plan Landscaping Costs
Landscaping is an important part of the budget because it is necessary for the beauty of the community, but can also become expensive. Look for ways yearly that you can save on landscaping costs. For example, you can try planting perennials instead of annuals one year to save on the yearly cost of purchasing annuals, or set aside extra money to invest in a sprinkler upgrade that will save on water expenses down the road.
Reassess Vendors and Insurance
Every year the planning of the new budget provides an opportunity to reassess all of your vendors and insurance plans. It is important to take the time to do this for two reasons. The first is that many of your vendors and insurance providers will increase the cost of their products and services on a yearly basis. The second is that you can ensure that you are still getting the best product for the lowest price. Companies change, and as they do, do not be afraid to switch to a different provider or vendor.
There will be inevitable increases in cost every year. It is crucial to anticipate these increases before they occur for the health of your HOAs finances. Consider utility increases as well as increases in cost of services and materials when putting together the next year’s budget.
Budgeting for each new year can be an overwhelming project. Always start early so that you can anticipate each change in detail. Doing this will help you or your HOA management company to build a budget that will serve the community well.