Everyone is seeing the impact of inflation, from a trip to the grocery store to monthly utility bills. In the past year, inflation amounted to 7.9% — the fastest pace since 1982 – according to the Bureau of Labor Statistics.
Inflation isn’t likely to resolve anytime soon, especially with the increasing energy costs due to Russia’s invasion of Ukraine.
This is especially troubling for nonprofits. Many charitable organizations receive a significant amount of funding at the fiscal year’s end – June 30 – and the budget implications are only just now obvious.
Nonprofit leaders need to navigate uncertainty and position the valuable work as critical, regardless of what economic indicators show.
What Is Inflation?
The simple definition of inflation is that it’s a sustained upward movement in the price of goods and services in an economy. If all else stays constant, this reflects a loss of purchasing power for a currency. It takes more currency units to buy the same goods and services.
Simply put, your money doesn’t go as far. You can’t buy as many groceries or essentials for the same amount as you did previously.
Many consumers associate inflation with the rise of a few key goods or services, such as oil or the real estate industry. but inflation is only present when the overall price of goods and services is increasing across the board.
When inflation increases faster than wages, it leads to a decrease in purchasing power that causes people to put up more money to buy necessities, but getting less for it. For the average consumer, this can create financial strain and reduced discretionary spending.
The problem here is that many people don’t understand what inflation really is. They believe the prices are increasing, when that’s not what’s happening. The value of each dollar is declining.
Why the distinction? If people believe that it’s prices, not dollars, donors may unknowingly reduce the value of their donations because they don’t regard inflation as the reduced value of money.
They’re not deliberately giving less – they’re accidentally giving less because they’re failing to recognize the diminished purchasing power of their donations.
Even if inflation were to return to its previous levels, it would take time before we see the effects of that. With the end of the year approaching quickly, fundraisers need to take a proactive approach to combat the effects.
Plan Ahead in Thinking, Giving, and Strategy
Donors want to make a difference – that’s why they donate. They’re not trying to decrease their gift, but they just don’t appreciate that it doesn’t have the same purchasing power.
We can’t expect them to know this on their own, however. They can be politely reminded that inflation affects nonprofits, too, and the cost of staffing, supplies, services, and more. It also impacts the lives nonprofits serve – if it’s this difficult for the people who can pay, imagine what it does for those who can’t?
Bottom line – we need more money to make the same impact. We need to ensure donors understand the need for the work and how the dynamics of the world impact it. Donors want to hear stories about those served by their donations, and how, so highlight some of your top stories.
If possible, show metrics of how donations allow impact. Whether the nonprofit is focused on food security, education, literacy, clean water, or support for families, showing the metrics ensures that donors know the impact of their investment – and why it matters if money doesn’t go as far.
How Can We Help?
External pressures like inflation can be a big catalyst for creativity and collaboration. How can we, as community leaders, partners, and corporations, plan ahead and be proactive in our efforts?
The simple solution is to increase the gift to account for inflation and ensure that nonprofits have equivalent purchasing power. But writing a check isn’t the only thing we can do.
Inflation not only decreases what can be done with the donations, but increases the costs for the nonprofits. Volunteering helps nonprofits do more with less, reducing the burden and ensuring that help goes where it’s needed.
Finally, there’s advocacy. You can spread the word about the efforts of nonprofits and encourage others to get involved. Whether they offer monetary gifts, volunteer their time, or spread the word themselves, it all makes a difference.
Let’s Talk About It!
I’ve had wonderful conversations with innovative leaders ready to grow their community and “put their back in it.” I’d love to talk to other leaders and business owners who feel the same. Schedule a 15-Minute Discovery with me and let’s get started!