Society is replete with examples of intelligent people doing foolish things, especially regarding their homes and their money. Homeowners know that maintenance and repair expenses are unavoidable,
The two most common Reserve Funding objectives are Full Funding,
The Hawaii Act defines a Full Replacement Reserve as the reserve funds for an asset equal to: The projected capital expenditure or major maintenance required for the asset at the end of its estimated useful life;
After the Component List has been created or updated, the current Reserve Fund Strength and a recommended Funding Plan are calculated. The Funding Plan typically takes the form of a recommended monthly Reserve contribution. This “action plan” is developed to take the Reserve Fund from its current condition to the Funding Objective. But the question remains, which Funding Objective, and why?
There once was a man with one foot in a bucket of scalding hot water and one foot in a bucket of ice water. When asked how he felt, he said “On the average, I feel just fine!” With that illustration clearly warning you of the limitations of discussing averages, how much should your Reserve contributions be?
