Fire Department Funding - How to Weather a Financial Crisis

There is no magic silver bullet to prevent hardships during a financial crisis.? But there are a few steps your fire department can take to ensure you have a better chance of surviving turbulent financial times.? This article will help fire departments develop a survival plan.

First, have the right mindset about saving

I speak to fire departments daily that think they should spend every penny of their income since they are "not for profit".? It is entirely appropriate for a "not for profit" to invest in a "rainy day fund" each year.? This will be savings that is increased during the good times so that it can be drawn down during the hard times.? Then, the cycle continues as good times return by investing in the rainy day fund to draw down during the next hard times.? This is prudent financial management.

It is important to treat this investment as an investment in your longevity.? You will substantially improve your chances at surviving a economically difficult time by having a financial cushion.

Note:? This rainy day saving is separate from the savings you may have for a large purchase such as a new fire truck or station.? The purpose of this savings is solely to protect yourself financially during a financial crisis.

Second, have the correct amount of savings

How much savings is enough?? That question is asked every day by fire departments across the country. And everyone wants the magic number.?

The fact is that the correct amount of savings is a function of your annual budget.? Your savings should equal from 6 to 12 months of normal expenses.?

If your department receives its income from reliable sources of income such as taxes, local contracts, etc., your department could probably be OK with closer to 6 months of expenses.?

If your department depends highly upon less reliable sources of income such as fundraisers, donations, grants, bingo, etc., your department should develop an investment plan to keep closer to 12 months of expenses in your rainy day fund.

Third, tighten down on spending

Your budget process should always identify essential expenses and non-essential expenses.? Then, during financially difficult times, you have clear identification of what expenses can be cut without the emotion of trying to figure it out during this difficult time.

Finally, examine all your debt

It's extremely hard to go bankrupt if you don't owe any money.? But most fire departments can't often be in this position.? The next best thing is to examine your current loans during a financial crisis.? If you have savings for a future purchase and a large outstanding loan, it may make sense to use this money to reduce your debts and payments.? It may even save you money as the interest paid on a loan is usually higher than the interest you earn in a savings account.

In summary

Hard times are survived when you plan and prepare for them.? You will never know when a hard time will hit, you'll just one day find yourself in it.? And the fire departments that are ready survive the hard times with less stress and a higher survival rate.

Stay safe! John Hill, Apparatus Budgeting Consultant
Envizion Financial
Toll-free (877) 368-4946

Go to http://www.envizionfire.com/RR.php to see me in action.

Go to http://www.firefinanceguy.com for stories about fire department finances