As we approach the end of the year, and before we dive into the holiday season we must keep in mind to set a budget for the rapidly approaching new year. Budgeting and forecasting is no fun and I agree it can be stressful, but it is certainly one of the ways to help preserve the value of your home/association and get a handle on the your/association’s finances.
Budgeting doesn’t always mean cutting down on spending. As long as a budget is adequately adopted on a consistent basis it can be seen from a perspective of understanding what funds are available and how to best allocate for those funds – which can include a little extra funds in the mix for some TLC. TLC can come in the form of replacing stairwell carpeting or refreshing up hallway walls with new color, or even replacing those outdated bulletin boards.
A few steps to keep in mind when forecasting is to first to understand expenses. Sometimes expenses incurred in one year are not necessarily the same amount that may be expended the following year, thus giving you wiggle room. Looking a past trends, signing up for longer period contracted services as opposed to yearly contracts and using negotiating skills can come handy when budgeting expenses.
Identifying and prioritizing projects are also an important part of the budgeting process. Ideally major projects (i.e., tuckpointing, roof work, gate repairs etc.) should be planned out couple/few years in advanced with payment from reserve funds. This is section that is most troublesome especially when there are many projects on the wish list. This is where needs and wants come into play. There is not much to get excited about when planning to maintain a roof as opposed to planning to beautify three-year-old landscaping building grounds. Both are equally important to preserve the value of the building but sometimes decisions must be made to go with what is less noticeable but more needed. Doing so will help avoid an unexpected Special Assessment throughout the year.
Once expenses and projects are squared away, the last but not least item to review is how much income is needed to cover operating expenses and any planned projects while allowing for a reasonable annual contribution to reserves. Occasionally this is when increasing assessments come in to the mix and where most cringe at the fact. Increasing assessment may not always be the solution. Other ways associations can generate income are through fees that can be enforced via its Rules and Regulations. Moving fees is one of the ways income can be collected to help enhance the community’s life. If you think about it, when moving take place (both in and out) there is wear and tear taking placing in the building. Adopting a non-refundable moving fee can help supplement the expense towards upkeep in the common areas. There are other ways to help generate income which necessarily do not come in the form of fees. This is often forgotten during budget preparation.
In summary, budget preparation takes a significant amount of time and effort that may not sound enjoyable but one thing to keep in mind is that it is very unlikely that everything will be addressed; nonetheless, doing so may bring to light things that may have otherwise been ignored.