The Art of Budgeting for Ministry Success 

For which one of you, when he wants to build a tower, does not first sit down and calculate the cost, to see if he has enough to complete it? Otherwise, when he has laid a foundation and is not able to finish, all who are watching it will begin to ridicule him, saying, “This person began to build, and was not able to finish!” – Luke 14:28-30 

While this parable of Jesus specifically addresses wisdom in building, this same wisdom applies to church finance. Budgeting is an important tool for a successful church ministry.

BUDGET MUST REFLECT VISION 

Vision without funding is just dreaming. While dreams have their place, Jesus tasked his church with more than just dreaming. A successful church has a vision for what it is called to accomplish, and budgets align with that vision to make it happen.

Practically speaking, this means that the very first step in your budget process should be a discussion with church leadership about what they seek to accomplish in the coming year. As the budget develops, be sure that this vision is not overlooked as you focus on fixed expenses, cost-of-living adjustments, and other mundane but important expenditures.

SET A BUDGET TARGET

After understanding the vision of the church, you need to set a target for the coming budget year. Several factors will affect this target. Is the church growing or declining? We all want to be growing, but if the church is shrinking and you don’t take that into account when you budget, the budget will fail. What is the impact of inflation and cost of living going to be? These are factors that will press your budget upward without intervention, and you need to consider them. A zero growth budget in a year with 6.9% inflation is actually a budget that has cuts to almost every department. 

Apart from the more obvious budget impacts, what are the other factors that may affect your budget? Did a new housing development just open across the street? This could positively affect your church attendance and your budget. Did the largest employer in town just close? You’d better be prepared for the loss of income that will follow as many of your people move or face an uncertain future.  

COST CUTTING – FIXED EXPENSES AREN’T ALWAYS FIXED 

As you review your budget for the coming year, how can you cut expenses without impacting the ministry? A few examples: 

• Loans can be refinanced when interest rates are low or re-amortized to reduce monthly expenses in times when money is tight. 

• Leases can be shopped around. You don’t have to take the lease the salesman is offering or better yet, consider used equipment. 

• Most rates are rarely fixed. If you have an energy market in your area, be diligent about finding the best energy rates. If one of your suppliers is hitting you with an increase, shop around to see if the pricing is still competitive or ask them for a break on the new pricing.  

• If you can, invest in long-term savings. For example, installing solar panels on the church roof can cut or nearly eliminate electric bills. There is an upfront investment but the long-term savings can be substantial.

MAKING PROGRAM BUDGETS WORK FOR THE CHURCH 

The classic approach to budgeting is to look at annual spending, and if a department didn’t spend all of its budget, reduce the budget for the coming year. This budgeting shortcut almost always produces bad stewardship as departments scramble to spend every dollar so that their budgets aren’t cut. Rushed spending is almost always bad spending.  

Within your program budget, evaluate programs for vision alignment. Just because you’ve always done a fun activity that everyone loves doesn’t mean it is accomplishing your ministry goals and should continue forever. Sometimes programs will have an outsized impact on your budget that doesn’t reflect your vision and goals as a church. Consider letting those programs die to make room for new programs that are in line with your vision. 

Finally, avoid across-the-board cuts or increases. This tempting approach doesn’t reflect the realities of programs and costs and will almost always yield poor results. For example, if you cut all of your budgets an equal amount and then run out of toilet paper with no money to buy more, your church will suffer in more ways than one.  

WORKING THE SALARY BUDGET 

When you first look at your salary budget you should analyze your staffing. Is your church staffed appropriately for the number of people who attend? How big is your staff compared to churches of similar size in your region? 

Some common pitfalls of salary budgeting include: 

• Poor benefits. If your church doesn’t offer much in the way of paid time off and medical benefits for full-time employees, you are going to have a hard time attracting and retaining quality staff. An employee who loves your church but never gets a day off or is getting crushed by medical bills is far more likely to leave for another church or perhaps even leave ministry entirely.  

• Cost of living. Inflation makes the money you pay your employees worth less than it was in the prior year. The Social Security Administration publishes cost of living at this address every year: https://www.ssa.gov/news/cola/ If you don’t consider cost of living in your budgeting, eventually your employees will discover they can make a lot more money working elsewhere, and you lose good people.  

• Underpaying or overpaying employees. While the danger of underpaying people is obvious, churches rarely consider the opposite problem. Overpaying an employee may create a situation where an employee is no longer called to minister at your church but cannot afford to leave. Maybe they no longer are in alignment with the vision and need to move on, but because of their high salary, they can’t afford the change. This is always painful for all involved and ultimately is bad stewardship.  

How to do salaries well:

• Evaluate roles against similar roles in the workplace. Your custodians and administrative assistants should make a similar wage to what they would earn in the same roles elsewhere in your town or city.  

• Utilize third parties. Companies such as ministrypay.com provide a way to compare your salary offerings against those of other churches. 
• Remember the goal of compensation is to pay your people fairly and care for those doing the work of ministry, not to keep the numbers as low as possible.  

Effective budgets require strategic planning and vision alignment. Done well, a budget will facilitate your ministry while helping you avoid overspending and identifying where money no longer needs to be spent at all. Developing a solid compensation strategy will help you attract and retain quality staff. When the budget supports the vision of the church, the church can thrive without being hindered by poor financial management.   

This post is based on information shared at a breakout session at our annual leadership conference led by Danielle Wittmaier, Executive Administrator at LEFC, and Joel Lingenfelter, Executive Pastor at LEFC.