Fall isn’t just about football and cooler weather—it’s also budget season for most HOAs. Preparing next year’s budget can feel overwhelming, but done right, it’s your most powerful tool for building trust with homeowners and keeping your community financially strong.
Here’s a step-by-step guide with actionable tips to help your board get it right this season.
1. Start with a Clear Process
Before diving into numbers, outline your budget timeline. A good process includes:
- Reviewing current-year financials (July–September)
- Drafting the first version of next year’s budget (September–October)
- Board review and adjustments (October–November)
- Homeowner distribution and open meeting approval before year-end
Pro tip: Assign one board member or your treasurer as the budget lead, but involve the whole board so there’s shared ownership.
2. Review Current-Year Actuals vs. Budget
Pull a year-to-date report and compare it line by line against your approved budget. Look for:
- Overages: Are utility costs higher than expected? Has landscaping crept above budget?
- Savings: Did you underspend on repairs or insurance?
- Trends: Are certain categories consistently off year after year?
Action step: Adjust next year’s numbers based on actual spending, not just last year’s budget copy-pasted forward.
3. Account for Inflation & Vendor Increases
Costs rarely stay flat. Many HOAs under-budget by assuming the same expense level year after year. Instead:
- Contact vendors (landscaping, pool service, janitorial, etc.) and request written estimates for 2026.
- Factor in inflation—in Texas, expect utilities, insurance, and general services to rise anywhere from 5–15%.
- Check your contracts: If any are up for renewal, build in potential increases.
Pro tip: Overestimating by 3–5% on key line items is safer than being caught short mid-year.
4. Reserve Funding Isn’t Optional
Your reserve fund is your HOA’s safety net for long-term repairs (roofs, paving, pool resurfacing). Boards often skip proper reserve contributions to keep assessments flat—but that only creates bigger problems later.
- Review your most recent Reserve Study (or schedule one if you haven’t updated it in the last 3–5 years).
- Follow the recommended annual contribution level.
- If your fund is underfunded, consider a phased plan to catch up over time.
Action step: Make sure your budget shows a dedicated reserve contribution line separate from operating expenses.
5. Plan for the Unexpected
Unexpected expenses—like storm damage, insurance deductible spikes, or emergency repairs—can wreck a thin budget. Build a contingency line item (typically 2–5% of operating expenses).
Pro tip: A contingency line builds credibility with homeowners. It shows you’re realistic about “surprises” and reduces the need for unpopular special assessments.
6. Communicate Early & Often
A great budget isn’t just about numbers—it’s also about transparency.
- Prepare a budget summary letter that explains major changes (in plain English).
- Host a budget Q&A session or town hall to walk homeowners through the highlights.
- Emphasize that the goal isn’t just covering costs, but protecting property values and avoiding special assessments.
Pro tip: Use charts or year-over-year comparison visuals to make increases easier to understand.
7. Double-Check Legal & Governing Requirements
Some HOAs are required to:
- Provide budgets to homeowners within a certain timeframe (check your bylaws/CC&Rs). We like to store the budget on the homeowner portal for all homeowners to access on demand.
- Obtain homeowner approval before assessments increase.
- Send notices of assessment changes with specific lead time.
Action step: Confirm your association’s requirements and build them into your timeline so you stay compliant.
8. Adopt a “Living Budget” Mindset
Once approved, your budget shouldn’t sit in a drawer. Treat it as a living document:
- Review it quarterly against actual spending.
- Adjust where necessary and document why.
- Use it to inform board decisions all year—not just in September.
Wrapping It Up Budget season may never be glamorous, but it’s one of the most important things your board does. By grounding your budget in actual data, factoring in rising costs, properly funding reserves, and communicating clearly with homeowners, you’ll set your community up for success in 2026 and beyond.
