Does High Inflation Make You Fear for Your Fundraising Efforts?

There’s no doubt. Nonprofit organizations face fundraising challenges that they have not seen for decades. Nevertheless, opportunities remain even as the latest economic news has not been good:

Consumer Sentiment: The University of Michigan Consumer Sentiment Index for March 2022 reveals that consumer confidence has plummeted 25.5 percentage points compared with March 2021. At 59.4 percent, the consumer sentiment index now stands at the lowest point in two decades. This is not surprising given economic conditions. Unfortunately, it means people will now be especially careful with their personal finances.

Uncomfortable Inflation: Treasury Secretary Janet Yellen predicts another year of “very uncomfortably high” inflation. In March 2022, the annualized inflation rate stands at 7.9 percent, a 40-year high. What’s even more troubling is that by calculating the Consumer Price Index now, using the same formula used in 1980, the inflation rate would stand at over 15 percent! The following chart from Shadow Stats illustrates this point:

Consumers Face Increased Expenses: The average American household is facing nearly $300 in higher monthly expenses due to inflation, according to Moody Analytics. Households in rural areas may face even greater monthly costs as fuel prices rise. This will likely negatively affect current philanthropic giving. While individual charitable giving usually comes in around two percent of disposable income, according to Giving USA, we’re now seeing the erosion of household disposable income.

Inflation May Not be Our Only Problem: Inflation is not our only reason for economic concern. Former US Treasury Secretary Lawrence Summers has not just expressed concern about inflation, he’s worried that US Federal Reserve policies dealing with inflation could lead the economy into a recession.

Despite all of the bad economic news lately, we’re fortunate that not all of the news is bad:

Unemployment Rate: The US unemployment rate stands at 3.8 percent as of February 2022, according to the US Bureau of Labor Statistics.  That’s the lowest in decades. Job vacancies are nearly double the number of unemployed people of record. While individual Americans might not enjoy ideal employment, they are finding paying jobs.

Wages are Climbing: As pressure has mounted in recent years to increase the Federal minimum wage, some local jurisdictions have taken action. Furthermore, many private companies have raised starting wages. The large number of job vacancies is also pushing wages higher as employers struggle to fill open positions. While it’s good that higher wages help mitigate the effects of inflation, pay increases are not anywhere close to keeping pace with the inflation rate.

Stock Market: While highly volatile, the US stock markets continue to perform well. For example, the Dow Jones has grown 6.74 percent in the past year, according to MarketWatch. This means many individuals are holding appreciated securities.

Home Values: American homeowners have seen robust growth in real estate values. Home prices have increased 19.2 percent as of January 2022 compared to a year ago. This has a profound effect on individual net worth.

While the flood of bad news means fundraising efforts will be challenging, particularly when seeking current cash gifts, the good news means that there are indeed great opportunities. So, what should you do to achieve fundraising success?

Keep Asking: The nonprofit organizations that will be hurt the most this year will be the ones that scale back their fundraising efforts. If you’re organization needs contributions, ask for them. During the Great Recession, I saw charities that raised far less money, usually due to not asking for support. Conversely, I saw nonprofit organizations raise dramatically more money during the Great Recession because they properly stewarded their supporters and effectively sought support.

Develop a Solid Case for Support: Asking for donations just because it’s fiscal or calendar year-end has always been stupid. It’s especially ridiculous now. It’s also pointless to simply ask for donations because of who your organization is. Instead, develop a strong case for support that will engage and inspire current supporters and attract new donors.

Engage Supporters: Yes, I said to keep asking supporters for donations. However, that should not be the only time they hear from you. Look for ways to engage people. For example, send surveys, hold in-person and/or virtual events, sponsor a townhall hosted by your executive director, offer facility tours, call supporters to thank them. The opportunities for engagement are only limited by your imagination. The more donors are engaged with your nonprofit organization, the more likely they will be to continue their support.

Monthly Giving: Monthly giving is an easy, relatively painless way for donors to increase their support. Most individual donors donate what they can afford in a given month. Well, each month, they may have access to more disposable income. In other words, many donors do not consider what they want to donate to your organization for the year. Instead, they consider what they can afford to give at the moment they are asked. So, give them the opportunity to give monthly.

Planned Giving: Giving through a Will or Beneficiary Designation provides people with an opportunity to support your organization with no economic sacrifice today. A gift of appreciated Stock can help a donor avoid capital gains tax. Recommending a donation through a Donor-Advised Fund requires no economic sacrifice. Other gift planning vehicles can give people the chance to support your organization while helping them in a variety of ways including economically. While it’s always been a good time to engage in planned giving, during times of economic stress, it’s an even better time.

While overall giving usually increases each year enough to outpace inflation, that’s not always the case. For example, in 1980, individual giving increased a whopping 11.3 percent in current dollars. However, when adjusted for inflation, individual giving actually dropped by two percent that year! Even in terms of current dollars, giving does not always increase year-over-year.

So, if you’re feeling stressed or worried, it’s understandable. However, don’t allow yourself to be paralyzed by fear. There are things you can do to achieve fundraising progress. Do them. Take action now.

How are your fundraising efforts going so far this year? Are you doing anything differently in 2022 than you did last year?

That’s what Michael Rosen says… What do you say?

2 Comments to “Does High Inflation Make You Fear for Your Fundraising Efforts?”

  1. Michael,

    Nice to see you in the inbox!! 🙂

    Good reminders and points.

    Rick

  2. Outstanding overview of our present predicament.

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