Did you know that two-thirds of people fear money and all its related issues more than spiders, snakes, and even death? We don’t leave this anxiety at home when we head to work, either. Nonprofit leaders falling into this group can experience fear, loathing and emotional paralysis when it comes to creating their organization’s annual budget. The irony is the budget is a nonprofit mission’s best friend. It’s the best tool for making the most of your charity’s finances and for making dreams, goals and missions come true.

Conquer Fear, Face Reality

Why is creating a budget so scary? First, our brains are designed to fear the unknown, and mastery of Microsoft Excel will never change that. And, weirdly, at the same time, ignorance is bliss, because we can’t worry about what we don’t know. Creating a budget for a person, a family or a nonprofit organization is just as contradictory; we fear the truth about our financial reality, but knowing our financial reality gives us power and relief. The emotional energy we spend avoiding our financial picture, however grim or rosy, is energy we’re not using to solve problems or create futures.

The emotional energy we spend avoiding our financial picture, however grim or rosy, is energy we’re not using to solve problems or create futures.

Get Out of The Comfort Zone

Second, the budget is the tool we use to dream bigger, reach higher and stretch ourselves and our organizations more broadly. Dreaming big is scary and pushes us out of our comfort zones. We are content to do what we did last year, because well, let’s be honest, it’s familiar. Setting goals and increasing our impact on the world can be scary, because we risk exposure, failure and censure. Despite everything we know about the way failure helps us grow, we resist it mightily.

Write It Down

Nonprofit leaders who are content to repeat last year’s performance are okay, and what if you dream of more? Increasing your cause-related impact, community reach, and scope of services is possible. The budget is so much more than an exercise in number crunching; it becomes your to-do list for the year. Smart leaders know if it makes it in the budget, it happens. So, if nonprofit leaders dream up an audacious goal, break it down into manageable steps and then layer its cost requirements into the budget, efforts are made to execute on it. This makes the budget a powerful tool for change, and it’s a little bit spooky too. Research has shown that people have a 42% greater chance of accomplishing their goals and dreams when they write them down. When organizations itemize bite-size elements of their dreams into a budget, they become unstoppable. Psychology tells us that having a dream is better than not having one and articulating it and putting it on paper is best of all.

Thoughtful Guessing

So how do you create a budget that keeps the lights on and reaches for the stars? Assembling a thoughtful budget requires the courage to make a SWAG, the technical term for a Sophisticated Wild Ass Guess. No matter the size or scope of your dream, such as hiring a new admin, expanding services or (your dream here), you have to research it.  How much will it cost and what are your options? The exploration process helps to clarify and refine your plan. Before something can show up, you have to get clear on what you really want. As you investigate, you may decide you need a trailer instead of a van, or two part-time workers instead of one full-time employee. Putting a number to your SWAG will guide you to evaluate whether your dream is suitable, modifiable, feasible and achievable in your time frame. The idea is to develop a realistic and attainable budget, not one so overwhelming it makes you want to take a nap.

Assemble A Budget In Eight Steps

If creating an annual budget seems daunting, let us help. Start at the beginning, and follow these simple eight steps to assemble your annual budget:

Take a Snapshot.

Review your current financial status. First, evaluate your current income and identify all its sources. Next, inventory your current expenses so you know exactly where your money is going.

What’s new next year?

Canvass your expenses and income sources, and account for the changes that you know are coming. If your medical premiums are increasing by 10%, add that to your expenses.  If you expect to lose a grant source in the coming year, adjust your income figure accordingly.

Dream it, then price it out.

Determine how much your dream initiative or purchase will cost and add it to next year’s expenses. Be sure to include the one-time costs as well as all the recurring usage or maintenance costs. A new van has a purchase price, plus ongoing insurance, gas and maintenance expenses.

What’s the new number?

How much more income do you need to cover your anticipated operating expenses and accomplish your dream initiative?

Make the ends meet.

Get creative about your untapped potential for income. You know the number you need to reach, so explore all the options available to you to reach it. Remember that performing additional work to increase your income will also incur additional expenses in delivering that work.

Sleep on it.

Be realistic and optimistic.

If you’re overwhelmed by the ‘number’ you need to reach your dream in one year, then decide what is possible in just 12 months. You can break your dream into stages, and work steadily toward your goal. Get out your scalpel, and carefully consider what can be done this year, and what can be included in the following year(s).

Share the dream and the plan.

Include your team in the budget process because they’re an important part of making your dream a reality. Get them on board with what you want to accomplish, and the steps required to achieve it, because you can’t do it alone. Involving your nonprofit board in the process is critical. As a nonprofit leader, you need their help to shape the outcome and to build the momentum needed to make your dream come true.

The Budget: Friend, Not Foe

In the nonprofit world, the budget is your friend, not your foe. It’s the key to making dreams of bigger and better mission impact come true. Don’t fear the budget! It’s a tool that tells you where you are now, and helps you move incrementally to where you want to be in the future. As a seasoned grant writer who has secured millions for charities, believe me when I say that dreams really do come true. And they become true more quickly when we write them down, share them with others, and then take intentional and incremental steps toward them.

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