Budgeting for the Budget


What is a budget and why do we do it? A budget is an essential planning tool for estimating your business or personal future income and expenses. A budget can be used to set goals and priorities and ultimately determine what you can and can’t do from a financial position. What it doesn’t do, however, is produce itself—however much we wish it did!

But how do you budget for a budget? Or, in other words, how do you ultimately decide what to prioritize when making a budget? It’s simple really when you understand the components that support your budgetary plan.

A budgetary plan starts with goal setting, which trickles into an action plan that should (hopefully) produce far more income than expense. Much the same as our own personal finances, order and planning should be the foundation of the budgeting process. So, where do you start?

Formulating the plan

Your first order of business is to look at your financial history, understand it, and become intimate with the ebbs and flows of your previous activity. What did your past budgets look like? Were they effective? Did they help your credit union achieve its goals?

To properly plan, you should understand where you are today and how you got here, and then compare it to where you envision your credit union going.

Once you have established your vision, you can start with a few basic planning tips:

Gather the data

Data is your friend! Gather as much of it as possible and use it to build history. This will help you to better determine past activity for future projecting and set more realistic goals. If you tend to spend X amount on compliance and that amount increases each year, make sure to include that increase in the budget. If limited data is available or you are just starting from scratch, current data is still needed to project an assumption. You must start somewhere.

Construct the plan

Where do you want to be, what do you want to accomplish, and what will it take to get you there? What are your end goals, initiatives, or financial forecasting expectations?

For example, let’s say you want to step up your marketing game in the coming year. How do you go about doing that? Are you hoping for a new website to market your credit union? Better social media efforts? More community participation? What will get you where you want to end up?

Develop financial projections/forecasting

Identify and define your key initiatives by estimating costs, determining revenue, and understanding the allocation of resources to establish where you will invest your time, effort, and money. Don’t forget to automate your budgeting tools by entering into an application or software to simplify.

Going back to our marketing example, how are you going to make that happen? Do you need to add a dedicated marketing employee? Can you factor that expense into the budget? Or can you have a current employee transition into that role? If you manage to increase your marketing efforts, what kind of member or revenue increase should you expect?

Analyze the data

Analyze the data collected to determine the outline of what you hope to accomplish with your end budget. What is your vision and how does the current information apply to the initiatives you have defined? Understand your financial footprint and use that knowledge to produce your operational goals.

Execute budget

The time has arrived to actually build the budget you’ve been planning for. Here, you should develop and execute the financial projections and forecasts you created for each data element needed to help you effectively set realistic, measurable, and quantifiable goals.

The gut check

Finally, it’s time to review the budget you made. Does your budget seem reasonable? If you were to compare your budget to last year’s performance, would it pass the gut check? In other words, does your gut tell you it’s realistic? Or are you building a budget on what you hope to happen?

Things to consider in projecting/forecasting

Fixed income and fixed costs

Fixed income and costs are essential in planning and preparing for your budget and can sometimes change due to many factors. These items can often have expiration terms and/or completion of contractual obligations. For example, if you have an asset that will fully depreciate during the year, you need to consider what, if any, will replace it and will that replacement costs be more or less.

Ask yourself, do I have any contracts coming due within the budget period, and do any of those contracts have fixed income or expenses tied to them that have the potential to change? These are often missed as they become just part of the plan year after year.

Variable costs/fixed income

If you live in Michigan, you certainly understand the potential for variable costs related to utilities that heat or cool your business, lawn care, and snow removal for the four seasons that seem to be anything but consistent. You throw in the economy and consumer confidence which determines behavior, which may or may not shift your seasonal activity, well, this is a bit of a guess.

Variable costs and income are some of the most difficult things to budget for as they are basically unknown. History doesn’t always provide you insight into the future as everything is always changing and forever in development one way or another.

Resource allocation

This is a big one as it will help determine whether you can achieve your goals. Thinking back at your action plan, what resources will your plan require? This could be labor, materials, equipment, time, vendors, or other financial considerations. How will you allocate those resources to reach your goal?

Cost of living increases and economic impacts

The cost of living (i.e. utilities, rent, labor, etc.) tends to increase each year, and some years more than others. With the recent inflation, it seems these prices are increasing even more so lately. When creating your budget, make sure to consider potential price hikes. Which vendors, services, or utilities are most likely to up their costs? Do you have any contracts that need to be renewed that could affect your current pricing?

Out-of-plan impulse scenarios

Have you ever heard someone say or have you ever said to yourself, “It was an opportunity I couldn’t pass up,” or  “timing wasn’t right, but the price was?” Not all opportunities come at a good time nor are specifically part of your plan or even a consideration in your budget, but somehow made the priority list for one reason or another.

Although sometimes you must spend money to make money, ultimately it’s best to, at the very least, be aware of your future desires even if you didn’t know it was one to begin with. If you are an impulse or emotional decision-making individual, understand that when formulating your plan, then ultimately applying it to your budget with “fluff.”

50/30/20 rule considerations

When making a budget, it can be helpful to refer to the 50/30/20 rule, in which 50% of your budget goes to needs and necessities, 30% to wants and discretionary items, and 20% to savings and goals. This isn’t a die-hard rule, but when you finish your budget, it can be a nice tool to reference. If 50% or more of your budget is going to necessities, for example, something might be off.

Budget pitfalls

Budget pitfalls can make or break your end goal for budgeting. Be diligent with keeping to the plan as it warrants, but be mindful that you cannot control everything. Stuff happens, sometimes it’s just necessary to roll with the punches and find new ways to accommodate the speed bump that you just ran over. There are always circumstances that change the rules, just never let the exceptions to the rule become the new rule that changes the overall success of your budget.

Some of the biggest budgeting pitfalls include:

  • Not planning or lack of sticking to the plan (outside of uncontrollable scenarios)
  • Not outlining clearly what is needed and wanted
  • Having or setting unrealistic expectations
  • Being too strict or rigid—not willing to bend when needed
  • Underestimating costs or perceived income
  • Unexpected expenses with no contingency
  • Lack of expense justification or validation; alternatively impulsive, emotional, or careless spending
  • Don’t set it and forget it
  • Not adjusting to uncontrollable scenarios by adjusting goals—this could be either way, for or against the end goal
  • Lack of accountability

Budget in a nutshell

Unfortunately, there is no silver bullet or crystal ball to tell you what will happen tomorrow, next month, or next year. However, using the outline above can help you to make a budget that works for you and your credit unions. Build from the foundation you already have and adjust when the need arises.


  • Amber Jecks

    Amber Jecks is an Accounting Services Consultant at CU*Answers with over 25 years of experience in the credit union industry. Previously she worked as a CFO at KALSEE Credit Union leading the finance, accounting, compliance, and technology teams while spearheading overall financial and investment strategies, budgeting, reporting, liquidity management, and asset liability management.

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