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HOA budgeting failures are not uncommon and can often be prevented by understanding one key metric: insurance prices. An HOA budget planning worksheet can help boards anticipate these costs rather than relying on last year’s numbers. 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 increased by a few percent each 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. Increasing HOA insurance costs can significantly impact the community’s annual operating budget. For some HOAs, insurance now accounts for an entire third of their annual 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 such a prominent 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, with every line item below and pre-built formulas that make HOA budget preparation easier. 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 you can’t afford, 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. The HOA budget process should begin with reviewing this year’s budget against what you actually spent. Take note of every category that was covered.
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 automatically baked into your agreements. Reviewing your HOA vendors can also help the board identify opportunities to control costs. 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 the monthly dues needed to cover everything. Be honest with yourself and your finances; it is always better to overestimate prices than to fall short on payments.
By month five, show everything to your board. If anyone objects to raising dues, show them the alternative: a small increase now or a bill with a higher net cost later.
In month six, the board approves the budget, the owners receive a formal notice, and the reserve payment is set up as an automatic transfer so it cannot be skipped.
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; factors such as severe weather, reinsurance costs, construction cost inflation, and stricter underwriting are all pushing premiums up.
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 was $1,100 in 2025.
What line item do boards forget most often?
Most boards often forget to account for bad debt. It’s not unheard of for owners to pay late, and some may not 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.
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