The foundation of every strong HOA budget is a willingness to do what is necessary and set accurate monthly assessments. Calculating what those assessments are is simple with Axela’s new online HOA assessments calculator.
Mitchell Drimmer, CMCA, LCAM
Just like the cliff swallows return to Capistrano every year, community association Board members must make their return to the boardroom to work on something very important: the annual budget. This HOA budget is a plan for how much money the association will collect and how that money will be spent to take care of the community. Remember: your governing documents define your community, but your budget sets its destiny.
When Should You Begin Working on Your HOA Budget?
takes time and effort. If your Board starts working on the budget in August, it can be finished by October. That gives you enough time to send it to the members and hold a properly noticed budget meeting, so the association can set the new assessments before next year begins.
Calculating Expenses
As a Board member, you must be honest about rising costs, things like insurance, electricity, and repairs are not getting cheaper. It also takes imagination and no small amount of courage. Board members must think carefully about what the community spent last year and what it will need to spend next year.
A good HOA budget balances money that comes in, like assessments and, and money that goes out, like management fees, landscaping, maintenance, insurance, utilities, and legal services. It also needs to include savings for the future, like a reserve fund for big repairs.
How Much Should Your Assessments Be?
If your primary goal is to maintain, or even lower assessments, you are not fulfilling your fiduciary duty, and there can be serious consequences. There are no free lunches, folks. If your expenses aren’t covered by the money coming in because assessment prices are lower than what your community needs, you will be forced to initiate a special assessment. That is not only disruptive to family budgets but tends to encourage delinquencies.
Raising the assessments every year is expected, and the owners must live with it, even if they voice irritation. That is why we call for “courage” when it comes to crafting an honest budget. Board members should not have the agenda of lowering or maintaining the assessment level unless the projected expenditures call for it. If costs go up, be brave, bite the bullet, and do the right thing.
Start Your HOA Budget Today
To make things easier, we’ve created an online HOA Assessments Calculator to help your Board determine assessment costs as you build the annual budget. Just plug in your community’s numbers—door count, anticipated expenses, reserve contribution, and delinquency rate—and tool will calculate important financial benchmarks for you. Determine how much bad debt you can expect, whether the association is bringing in more money than its spending or not, and how to set your monthly dues.
The key to a good budget is starting early, working together, and being honest about the needs of the community. This budget season, as your Board returns to the table to get the budget done, remember to be courageous in the face of opposition, as it is necessary for your community to succeed.
