Show Me the Money: The Difference Between Wise and Foolish Budgeting

There are generally two types of organizations when it comes to how they manage their money.

The first group looks at what came in last year and then adds a percentage of how much more they hope to receive in the coming year. They view that additional percentage as the “faith” portion of their budget.

There are other organizations that begin in the same place. They first look at what came in last year, but they subtract a percentage from what they expect to receive in the coming year. They would argue that the entire budget requires faith.

Obviously, these are two extremes, and there are also many organizations that are somewhere on the spectrum in-between.

These two approaches to managing money lead to two very different outcomes.

For that reason, I’d place the first organization in the “foolish” category when it comes to stewardship of financial resources, and I’d consider the second group to be “wise” in their approach.

Here are some examples of the trends that distinguish the two:

I want organizations to be wiser with their financial resources, because it creates opportunities for generosity—including investments in new initiatives that the foolish will never be able to afford.

In which direction does your organization lean?

The following questions might help you diagnose your tendency:

• Do you plan to spend less than you reasonably expect to receive?
• Are you willing to make tough calls and cut expenditures in some areas to fund other priorities?
• Have you found yourself in the enviable position of finding new ways to bless others or expand your vision because you received more than you planned to spend?
• Are you fully funding your growth engines to experience new opportunities rather than just funding what you’ve done in the past?
• Does your budgeting process create freedom for leaders to accomplish the mission of your organization?

If you answered no to any of these questions, it may be time to revisit whether or not you are wisely stewarding your financial resources.

This article was originally posted on Tony Morgan’s website.