Finance and Budgeting Tips for Young Nonprofit Workers

On a dreary Monday night, I headed uptown to the Young Nonprofit Professionals Network (YNPN) event "How to Live on a Nonprofit Salary: The Ins and Outs of Personal Finance for the Nonprofit Professional." The seminar was led by Dana Skallman, financial adviser and board chair of YNPN-NYC, a regional affiliate of the professional development group that supports "the next generation of nonprofit leaders by providing opportunities for skill-building, information sharing, and networking."

Held at the Support Center for Nonprofit Management, the seminar covered a broad range of issues -- credit, debt elimination, personal budgeting, investing, and retirement savings -- and Skallman's presentation was perfectly pitched to the fifteen or so nonprofit professionals -- all under the age of thirty-five -- in attendance.

Here are some of the topics she covered and a few takeaways from the discussion:

Student loan debt. Two recent pieces of legislation that every young nonprofit employee should be aware of are the public service loan forgiveness program and the Income-Based Repayment (IBR) program. Although you have to have federal student loans to be eligible for either, the programs in combination can help you reduce your monthly loan payment(s) and the actual loan repayment schedule.

Setting up a rainy day fund. Financial advisers used to recommend setting aside three to six months of net income for a rainy day. But these days, with the economy still wobbly, people are advised to set aside six to eight months of net income. Everyone in the room agreed that could be hard, if not impossible, in New York City, so Skallman instead suggested setting small amounts of money on a regular basis with the goal of saving up to six months of net income. Developing a regular savings habit, added Skallman, is much more important than making a big deposit to a savings account every once in a while.

Increasing your monthly income. Skallman also recommended getting creative about your skill set (e.g., selling crafts or investing [wisely] in real estate) as a way to generate additional income.

Investing/saving for retirement in your 20s and 30s. If you're in your twenties or thirties, start saving for your retirement now -- and especially before you start having kids and saving for their education. Skallman also recommended that we consider putting our short-term savings (funds set aside for for things like next year's vacation, grad school, or a down payment on a home) in a money market account. Even though money markets are paying zero interest these days, they are insured (up to $200,000) by the Federal Deposit Insurance Corporation, which means you'll never lose your initial deposit.

Budgeting on a nonprofit professional's salary in NYC. Go for free entertainment options (e.g., DVDs from the library instead of Netflix, concerts in the park instead of concerts at Madison Square Garden, etc.) as much as possible, and try hard to reduce your discretionary spending. Here are a few ideas the group came up with:

• brown bag your lunch
• trim your cell and cable/Internet bills by using Skype and dumping the premium channels (technology is a budget-savvy person's best friend!)
• make a list before heading out to the grocery or discount store
• monitor your monthly statements for erroneous or undeserved charges

Okay, it's a start. What are your tips for saving money and keeping yourself on a budget? Enquiring minds want to know. And what other bits of financial wisdom do you have for young nonprofit professionals? Use the comments section below to share your thoughts....

-- Regina Mahone

Comments

[Ian David Moss]

I haven't tried it, but I've heard that mint.com is awesome for managing one's personal finances.

[Regina Mahone]

Thanks for the suggestion! A few friends have recommended mint.com. I'm just nervous about submitting all of my banking/credit card information to the site.

[Elizabeth C]

I use Mint and have never had a problem with the security. The site uses bank-level encryption, so if you're comfortable doing online banking then Mint shouldn't feel much different.

[Kris Putnam-Walkerly]

Regina,

This is a great post, and I'm glad that YNPN sponsored such a practical and helpful session. I wish I had such education during my first nonprofit job in San Francisco when I made $12,500/year and subsisted on burritos in the Mission District.

I think saving for retirement is the biggest piece of advice, as many nonprofits lack retirement benefits. Even getting in the habit of putting aside $25/month if that's all you can afford.

I think it is also important to educate people that you *can* make a decent salary in the nonprofit sector, and that nonprofit workers *deserve* to make a good living. One thing young NPO workers can do is conduct informational interviews with more seasoned nonprofit leaders to learn how they got to their position, and what advice they have for those coming up in the field.

--Kris Putnam-Walkerly
Putnam Community Investment Consulting, Inc. & Philanthropy411 Blog

[Regina Mahone]

Good to know. Thanks!

[Regina Mahone]

"I think it is also important to educate people that you *can* make a decent salary in the nonprofit sector, and that nonprofit workers *deserve* to make a good living."

Good point. Someone at the seminar made a comment that it doesn't matter which sector you work in (nonprofit or for-profit), the saving strategy is always the same -- live within your means and set aside at least 10 percent of your income.

Thanks for sharing your thoughts!

-- Regina

[Kate]

My first non-profit salary was $12,000 a year and I lived on 25-cent mac & cheese and ramen noodles. If I'd stayed with that organization through my career, with the typical 3% annual raises, I would be making $27,000 a year and probably still be living in a basement apartment. Most non-profits are not able to give anything more than small annual inflationary raises, and often provide young professionals with little opportunity for promotions and higher salaries. Unfortunately, if you're faithful to the organization that hires you as a young professional, you have little opportunity to get ahead financially.

I'm now able to own my own home and have a healthy retirement account, but only because I have worked for five different non-profits in 28 years, negotiating significant salary boosts each time I changed jobs.

[StephenBauer]

I want to second the comment by Kris Putnam,

Research has shown that the salaries in the nonprofit sector are on par with the type of work that an individual does for their job, not that they are working for a nonprofit to do that work.

[Alhays2]

Great article! I wish I could have been at the YNPN event (despite the dreary weather!) As a current college student interested in the non profit sector, I do have initial hesitations about the industry while balancing significant student loans. Thank you for the links to the public service loan forgiveness and IBR! I also like the idea Kris mentioned about interviewing current NPO employees to gain insight and hear advice.

[Matt]

Great post, Regina -- even for those older than 35!

[Scott]

I think my strategy will just be to not work for a nonprofit that doesn't pay me enough to live on. Think about it - you know what your bosses make, because you can look up their salary in I-990 forms. I worked somewhere where the President of the organization was making almost $70,000 more than anyone else in the organization. They could afford a $150,000 a year salary for him, but paid the people who did the actual program work - who without the organization couldn't function - so little that every had to do other jobs on the side to earn extra income to make ends meet.

If your org doesn't pay you enough so that you can afford rent, leave.

[Nehal]

I realize the importance of getting into the habit of saving. I have been using Mint for a while and its extremely convenient. However, it requires managing your accounts and expenses based on personal usage. Often, my cash expenses get unrecorded. Infact, for one month I went on only spending through cash - so I'd withdraw a certain amount per week (based on rough budget)and only use that cash. It helped a lot as several of my unwanted card expenses were eliminated.
Overall it is good to be aware that being in the nonprofit sector is not lucrative but it does provide a good financial stability over a period of time.

[Edwin Goutier]

Believe it or not, Bank of America has an excellent budgeting and net worth module called "My Portfolio" that tracks your spending, helps you set goals for discretionary spending, and even lets you import liabilities (student loans, credit cards) and assets (retirement accounts, savings, stock portfolio). With their help, I know that I'm worth -$5,000! But I also know that my financial position is steadily improving.