Why a Long Term Perspective is Essential

It is about financial security.

I've been an owner in a HOA for more than 15 years and on a board for more than half of that. One thing I've learned is that boards worry more about the next week than they do the next 10 years. That failure of long term planning has serious repercussions.

It is important to realize that board members are drawn from the ranks of owners. In this "just do it" and "short term planning" society it is to be expected that some board members have difficulty planning for the year's bills, much less paying them.

Nevertheless long term planning is essential in a HOA as well as in one's personal life.

Here's a graph which depicts the consequences of a willingness to plan for at least 10 years. This is a chart of a possible retirement financial plan. The chart indicates the consequences of hard work and planning from the "Panic" of 2008 to the present.

At present the stock market is undergoing one of a normal sequence of "corrections." These happen periodically and can be exacerbated when the lemmings flee for the exits.

The chart shows the consequences of planning, saving, and developing a balanced portfolio comprised of bonds, cash and stocks. Of course, one can't invest unless one saves. That requires one to earn sufficient money to pay today's mandatory bills, control discretionary spending and save the rest. There really aren't that many differences between one's personal financial approach and a HOAs financial approach. So the graph presupposes that 1) One is living within their means, 2) Saving the difference, 3) Prudently investing what is saved in a retirement account.

This is precisely what HOAs require of board members: save, invest and plan for a distant future.  One would be surprised if boards are simply about getting votes and meeting today's bills. But that is so, so inadequate. It is also a very real approach in some HOAs  Which is why financial plans so often fail. "Short term planning = Long term failures". The chart indicates that there are other possibilities, even in one's personal life. But to do so will require education, planning, preparation and sacrifice. Not necessarily what boards are capable of.

In a HOA this is a direct consequence of the owners, who demand short term results, want their fees low, and have no problem passing the buck and the bills to future owners. It has happened here.

Nevertheless, this is what having a long term plan can provide to one's retirement planning:

Owners may not agree, and may vote for the politicians and the promises. After 15 years at BLMH I can state that approach doesn't turn out well. It took substantial intervention to overcome this approach.