How to Create and Manage an HOA Budget
Let’s be honest…
Budgeting probably isn’t anyone’s favorite part of running an HOA. But it’s one of the most important. Budgeting is important because it ensures your HOA has the funds to cover essential expenses like maintenance, insurance, and utilities. While the treasurer usually takes the lead, every board member shares responsibility for making sure the numbers are accurate and realistic.
So, how do you build a solid HOA budget without getting overwhelmed?
Start by reviewing your governing documents. These will tell you what your HOA is legally required to cover, how reserves should be handled, and what the approval process looks like. Knowing these rules upfront helps you stay compliant and avoid headaches down the line.
Next, consider forming a budget committee. Budgeting is a team effort, and pulling in a few key players, like the treasurer, HOA president, and other board members.
Then, take a look at your past budgets. What did you spend last year? Where did you overestimate…or underestimate? Reviewing past numbers gives you a better sense of what to expect.
Pro Tip: HOA Simplified offers full financial management, including budgeting help, reserve planning, and custom reports. We are here if you ever need professional help!
Next: the reserve fund. This is a very important part. It’s what kicks in if the roof of your clubhouse is torn off by a tornado.
The reserve fund is your safety net for big-ticket items like roof repairs or emergency plumbing work. Allocate at least 20% of your annual budget to reserves.
Once all the numbers are in place, pull together a draft document. That should include:
- Income from assessments, interest, and any other sources
- Administrative costs like legal, office, or management fees
- Day-to-day operating expenses (utilities, vendor services, etc.)
- Insurance and taxes
- Contributions to your reserve fund
Best of luck!
If you’re lost, here is a sample budget allocation, for a typical HOA:
Key Definitions That Might Help:
Dues: Regular payments from homeowners to cover HOA expenses.
Reserve Fund: A savings account for future big-ticket repairs and replacements.
Compliance: Making sure your HOA follows the law and governing documents.
Portal: An online hub where homeowners can view documents and pay dues.
Engagement: Communication and participation between the board and residents.
Back-Office Support: Help with financials, reports, and paperwork behind the scenes.
