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HOA budgeting failures are not uncommon, and oftentimes they can be prevented with an understanding of one key metric: insurance prices.
Here’s why, and here are some tips to help you budget around it:
Start With Insurance
Back in the day, people did not fear insurance prices as much. They went up a few percent a year, and were relatively easy to predict and accommodate. That era is long gone. Between 2021 and 2024, premiums rose about 24%, and they are predicted to rise another 7-10% by the end of 2026. For certain HOAs, insurance now takes up an entire third of their yearly operating budget. If that doesn’t surprise you, we don’t know what will.
Our advice is to shop the market three to six months before renewal. When something has that prominent of an effect on your budget, it is worthwhile to get ahead of the program.
Worksheet
We turned this guide into a ready-to-use budget spreadsheet—every line item below, with pre-built formulas that tell you exactly what you need to know. Click here to use it, this one’s on us.
Income
Make sure there are regular assessments by unit type and count. Budget late fees conservatively in order to avoid coming up short, and add any interest earned on your accounts. Also make sure to account for small incomes such as clubhouse rentals and parking. They tend to add up more than you’d expect.
Operating expenses
We can’t stress it enough: in almost all cases, you’ll want to consider insurance first. Predict the escalated rate instead of copying last year’s figure, and again, do not be too optimistic. Once you’ve done that, work through your other costs: landscaping, repairs and maintenance, management fees, professional fees, anything else that will drain your bank account. Make sure to scrutinize the management fee as well. If the price has gone up, find out exactly what is changing, and why.
Reserve contribution
This cannot be overstated: always treat your reserve contribution as an obligation. 74% of HOAs are considered underfunded, and you want to be in the 26% that is staying sufficiently afloat. Do not spend money where you can’t afford it, and save where you can. Hitting your goal will always pay off in the long run.
The Six-Month Calendar
It is important to start early, ideally six months before the fiscal year ends. In month one, put this year’s budget next to what you actually spent, and take note of every single category that went over. When month two rolls around, start reaching out to insurance brokers and asking for quotes. Waiting around for the renewal letter essentially means accepting whatever price they decide to give you. In month three, read your vendor contracts. Price increases are often baked into your agreements automatically. Get figures from each vendor in writing, and if you don’t like them, find a better alternative and save. In month four, add everything up and calculate what monthly dues would need to be to cover everything. Be honest with yourself and your finances, it is always better to overestimate prices as opposed to falling short on payments. In month five, show everything to your board, and if anyone objects to raising dues, show them the alternative: a small increase now, or a bill that is a larger net-cost later on. In month six, the board approves the budget, the owners get a formal notice and the reserve payment gets set up as an automatic transfer so it cannot be skipped over.
Also, word to the wise, keep your bookkeeping organized. If you can’t easily scan through your finances, it’ll cause a lot of pain down the line.
Frequently Asked Questions
When should we start the annual budget process?
It’s recommended that you start the process approximately six months before your fiscal year ends. You want to do this so you can gather insurance quotes ahead of that renewal.
Why is our insurance premium rising so fast?
This is a problem that most people face. Don’t feel like you’re the only person this is happening to. There are a plethora of reasons these increases happen, things like: severe weather, reinsurance costs, construction cost inflation, and stricter underwriting are all pushing up those premium costs.
Should we hold dues flat to keep members happy?
We would recommend that you don’t. Those flat dues that come across the table usually turn into a special assessment tomorrow. According to the data we’ve come across, the median special assessment ran $1,100 in 2025.
What line item do boards forget most often?
Most boards often forget the bad-debt allowance. It’s not unheard of that owners will pay late and it’s possible that some will not even pay at all. It’s recommended that you actually build in an allowance that makes sense. Crazy right? Once you do this, your cash flow will stop surprising you.
Sources: Association Reserves, Community Associations Institute, Foundation for Community Association Research, Consumer Federation of America, Cotality
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