I used to detest the process of budgeting. There are so many factors to consider in any budget’s development that it can be tough to know where to begin. In fact, I’d get so far down the rabbit hole of “what ifs” it felt impossible to even get started.
Then there was my fear of being wrong. As a natural “under project and over deliver” devotee, I’d worry about creating a budget that was too aggressive. While I’ve learned that budgeting conservatively can be a real advantage, I’d take this mentality so far that my budgeting style was less “realistic forecaster” and more “doomsday alarmist”.
I’ve found that a lot of other people struggle with the budgeting process too – not necessarily for the reasons I cited but usually for some variation of “it’s overwhelming”.
Having just finished a number of annual fundraising budgets for my non-profit clients, I have been thinking about some of the budgeting tips I’ve picked up over the years. These hints have really helped me tackle the budgeting process head-on with much greater confidence than I used to. Not only that, but I’ve found they’re applicable when it comes to all sorts of budget creation – from client budgets to personal and household budgets and more.
1. Start with a template
When it comes to budgeting, there’s no need to reinvent the wheel. My first step is always to identify an existing budget to work from. This might mean picking up last year’s budget for your organization, or it might mean identifying a budget for an existing client and using it as a base for a new client you haven’t worked with before.
This is how I start each and every budget process – I identify the budget I’m going to use as my template and highlight everything on it. Then, one line at a time, I make my adjustments/additions/deletions and un-highlight as I go. It’s a simple thing, but this helps me to very easily see what I’ve done so far and how much work I have left to do.
If you have no idea where to begin, use the magic of the internet. Six months ago I started to plan my wedding and had no clue what a budget for nuptials should include. So I Googled “wedding budgets,” downloaded a few free spreadsheets of ready-made projections, and picked the one I liked best. I used the same process as above – highlighting everything and un-highlighting as I determined what my expected costs would be. It worked out really well and helped us keep our wedding under budget.
This isn’t to say that your final budget will look anything like your base budget. It might, or it might not. But having a template to work from will save you the frustration of staring at a blank worksheet, wondering where to start.
2. Print it out
Usually I avoid printing things out when I can… saving the rainforest and all that. But when it comes to budgeting, I’m liberal in my use of the print button. Why? Printing out reference material saves loads of time and makes your work more accurate.
Instead of opening countless reference documents each time I sit down to work on a budget – opening then minimizing and reopening and accidentally making changes to my past budgets, results documents, etc. – I have a folder handy with all that back-up material at the ready. I clearly label each reference document so I know exactly what I’m looking at, and I only have to do it once.
When I’m working on a non-profit client’s fundraising budget, my reference folder might include documents like past year budgets, actual overall campaign results, results by segment, and donor data counts. If I’m working on our personal household budget, my reference folder includes credit card statements, recent utility bills, recent paychecks, bank statements, etc.
Whatever documents you’ll need to reference, putting in a little time up front to print these materials out at the beginning of the budgeting process will be a time-saver in the long run and will help you to quickly and accurately reference the information you need. Anyone who’s had more than 5 excel worksheets open simultaneously knows that with each open spreadsheet the chances of you accidentally looking at the wrong document and making incorrect assumptions increases exponentially. Don’t risk it. Make accessing your reference information as easy and fool-proof as possible.
3. Document everything
I love Microsoft Excel, and one of my features when it comes to budget creation isn’t some fancy formula or pivot table function, it’s adding a comment to a cell. This unobtrusive feature has become my go-to tool with regard to budgeting. I add a comment to nearly every number I drop into a budget to clarify where that number came from.
For example, my comment might note that I’m budgeting $11,000 for a line item because the actual FY2013 cost was $10,800 and costs are expected to increase about 1% this year… or it might note that I’m projecting a 5.5% response rate to a campaign because even though last year’s campaign only generated a 4.5% we’re going to focus on more responsive segments this year.
These comments serve several purposes:
- They remind me how I arrived at the numbers I projected.
- They help my colleagues/board members to feel more confident about the figures I’m presenting.
- When it comes time to report back on actual results, they serve as a reminder of what we based our projections on. This is especially helpful if you don’t meet projections, because you’ll want to remember why it was you thought you could hit these numbers and make sure that in future budgets you don’t make a similar mistake.
Documenting how you arrived at your budgeted numbers is an up-front time investment that will save you time in the long run. Prevent yourself the hassle of having to dig through your notes to remember why you projected the way you did. Prevent having to answer the same question from a co-worker, supervisor, and board member by giving them access to the detailed answers they might need right up front. They’ll be grateful for it – and you will too.
4. Version up (and save up) a storm
Budgets are likely to go through many rounds of review and versioning. Perhaps for your organization’s budget you want to create a few 3-year projections – one showing the impact of greater investment, another the impact of cutting costs, and a third showing what a flat budget would yield. You might want to run your household budget several ways – one to show how much you could save if you were extra judicious about spending, another that’s more consistent with your current spending habits, or perhaps a version that shows what would happen if you decided to refinance your mortgage or undertake a home renovation project.
Versioning is your opportunity to explore all the possibilities. Go into this process with an open and curious mind and you might be surprised what you learn! But whatever your budget versions look like, save them all.
I realize this sounds pretty obvious, but I learned this bit of advice the hard way.
After spending weeks on a client’s budget I was happy with, it went through several rounds of review and a number of changes were made. When it came time to present to the board, our team decided we’d rather go in with the more conservative budget we started with… but everyone sounded so confident in their changes that I hadn’t saved that original version. It didn’t take me too long to recreate my original budget recommendation, but I vowed then and there to never let that happen again.
Even if you don’t end up using one of your budget versions this year, having them as a reference come next year’s budgeting process will put you several steps ahead. And in my case, it would have saved me exactly one sleepless night and a near panic attack.
I never thought I’d become a person who actually looks forward to budgeting, but somewhere along the line it happened. While practice certainly has a great deal to do with it, I credit the above strategies with helping me become more confident creating budgets at work and in my personal life. I hope they’ll get you thinking about some ways you might make budgeting a bit less burdensome in your life too.