Preparing for Leadership: Budgets

At it’s core, a budget is basic arithmetic. I have $100. I want to buy something that costs $15. Can I afford to buy it? Yes! How much money will I have left after I do? $85. Sometimes though, hearing the word budget makes people feel a sense of overwhelm. As if creating and maintaining a budget is this insurmountable task. Let’s breakdown the pieces of a budget to demystify this skill.

Income

Sometimes called assets, this is where you track the money you have. This includes both one time income and recurring income. It is important to give each source of income its own line in your budget. This is called a line item. Giving each item it’s own line will help you to make adjustments more easily in case one of these things changes.

Expenses

Sometimes called liabilities, this is the stuff you spend money on. Sometimes you can plan for these things (food at meetings for example) and sometimes you can’t (repair/maintenance costs). Expenses are often categorized as either fixed or variable. Fixed expenses are the same each time and, as a result, predictable. This might be things like rent, car/loan payments or Netflix subscriptions. Variable expenses can change from month to month, day to day, or quarter to quarter. This might be your energy bill, credit card bill, or grocery bill. Sometimes you can make a variable expense a fixed expense by creating a limit (budget) on how much you will spend on that thing. This keeps your Starbucks habit until control.

(Optional) Budget Projections

Sometimes projecting your budget can be helpful as a way to plan for the future. As the name implies, with a projection, you’re projecting or estimating what your income/expense might be. You may be expecting a bonus at the end of the year but until you actually receive it, you can’t include it as income. Same thing with expenses. Projecting a budget can be especially helpful if you’re trying to decide if you can afford to do something. You might have multiple projections. One to cover what your budget will look like if you get that raise/commision/donation/sponsorship you’ve been promised and one to cover if you don’t.

Budgeting for your organization is no different from creating a personal budget. In both cases, you’ll have income and expenses. The difference is the individual (line) items you have. As you become more comfortable with budgeting, you can venture into more complex topics such as zero-based budgets, operating budgets, performance-based budgets. Try creating a budget for yourself and see how you do. Be sure to review other tips for creating and maintaining budgets here.

As our Preparing for Leadership Series comes to an end, remember that leadership is an ongoing journey. Make sure you’re always looking for ways to increase and improve the tools and skills you have in your arsenal. This will increase your leadership effectiveness and confidence!

Always Be Curious, Hornets!