How to Create a Church Budget
Certain personality types seem to enjoy writing a church budget. But for the rest of us, it can seem intimidating and boring. But no matter how it feels, a reasonable budget is your ministry’s lifeblood. It’s how you ensure that the resources you need to fulfil your mission aren’t eaten up by everyday urgencies.
As pastors, we tend to think that we should focus entirely on leading, teaching, counseling, and shaping the people in our care—and that’s true. But stewarding your resources to make sure you’re able to do those things well makes the budget a pastoral document. After to your mission, there’s probably no other document that needs your pastoral leadership like the church budget.
In this comprehensive post, we will unpack all of the issues you should be considering as you put your budget together, but if you’re ready, feel free to jump ahead to learn how to write a budget.
I’m writing this from a pastoral perspective and not as a financial advisor. Before starting your church budget, it’s advisable to seek the input of your own accountant or financial advisor.
Why You Need to Create a Church Budget
The money coming into your church is given by faithful people who long to serve God, build his kingdom, and they believe in your church’s mission. With that in mind, you have a great responsibility to be as wise with how that money is being distributed and spent.
A church budget is an extremely easy document to understand when you think about it like this:
1. A church budget tracks the money coming in
Undoubtedly, this is important. Before you can allocate the spending of your funds, you need to have a good handle on what your church has to spend and how it comes in.
What months or services tend to have the largest offerings? What are your leanest months?
2. A church budget tracks the money being spent
To say that budgeting is keeping track of the money coming in and the money going out probably seems glaringly obvious. But it’s really that simple. The truth is that your budget is only going to be as good as your financial awareness.
The longer you keep fastidious track of the money coming in and out, the easier creating accurate budgets will be in the future.
3. Creating a church budget protects important ministries
The challenges you have in home finances are similar to the challenges a church experiences on a larger scale. If you eat out too often, you’ll soon find that you don’t have money for things you really need. A budget ensures you set aside money for things that you might not otherwise.
Without a strong budget, there’s a danger to important, but smaller, ministries to lose out to the needs of high-profile ministries. For instance, there never seems to be a lack of ways to spend money on the worship service—the sound could always be cleaner, the technology could always be more current, and the stage design could always be more inviting.
Having a set budget for areas like children’s ministry or small groups allows you to set up a boundary to protect those ministries from the bigger ones that might eat up all of the funds that you allow them access to.
But maybe some of your few key ministries always seem to be a few dollars short of a full budget. If that’s the case, discover how other churches are nurturing generosity within their communities to help fund those critical ministry endeavors. Download the free ebook, Teaching Your Church To Give today.
4. Your church budget represents freedom
Contrary to how it might feel going in, a budget is freedom. It represents liberty from:
- Debt: Being able to allot money to go into savings or to pay extra on outstanding loans is the key to getting your church out of debt—and keeping it out.
- Ignorance: A church budget stops people from assuming they know where the church money goes and allows them to see how it’s being used.
- Competition: I have worked for churches without strong budgets, and every month it was like someone placed a bowl of money in the middle of a room and let ministries fight over how it got used. While you’ll probably never entirely do away with ministries competing over their budgetary line items (which is actually a good sign that your staff and volunteers are invested in their ministry), you can stop a lot of the regular, and sometimes ugly, competition for resources.
- Lackluster ministry: Creating a budget that reflects your mission statement’s values means that money is going to the ministries it needs to. Ensuring that your use of resources reflects your priorities is probably the greatest reason to create a budget.
Why You Need to Create an Open Church Budget
Transparency is the key to ministry, and this includes the ministry’s financial aspects, too. I’m not just talking about letting people know whether or not you’re meeting your budget week to week, or hosting an annual business meeting where you show some charts and PowerPoint slides.
I’m talking about allowing people to be more involved and aware of the whole process of creating a budget, and how those resources are being used. Any tax-exempt organization is already required by law to disclose expenditures like salaries, building expenses, etc. The expectations required by law should only be the beginning of what a church is willing to make available to members. After all, the budget is a communal document that only makes sense in light of community. There shouldn’t be any aspect of the budget that is hidden or undisclosed.
1. Transparent church budgeting creates buy-in
Getting everyone involved in the process creates enthusiasm for church ministry and the budget. When people can actually see what’s happening with church finances, they begin to understand better the needs of the church and how their giving directly impacts what the church is able to accomplish.
It’s understandable that some would object to the idea of budgetary transparency. There’s always a chance that knowing people’s salaries, knowing what the line items are for different ministries, or knowing how much regularly comes in or goes out can be used by certain people to create institutional headaches. But the answer to that potential problem isn’t secrecy, it’s education.
There can be a disconnect for some people between their faithful giving and the church’s budgetary needs. Having a clear, accessible budget and clarity on where the church is in regards to their budget can help people make that connection and feel a sense of personal involvement and responsibility.
2. An open church budget fosters belonging
Because a budget is a communal document, openness helps to make people feel like they’re important, contributing members of the community. Many churches have reported that soliciting feedback and involvement with the budget have helped them overcome the old “20 percent of the people do 80 percent of the work” rule.
Imagine being part of a household where you’re required to contribute to help sustain it, but you have no input into how the funds you give are used and no real awareness of where it all goes. But if you knew how the money was spent and your input was solicited, you’d feel like more of a contributing and significant member of the household. You would feel more responsible. You would want to be more involved.
Churches have reported the same thing happening when it comes to their own congregations. As soon as people feel invested in the church financially and see that their feedback is encouraged and valued, they’re more apt to invest in other areas and ministries.
3. An open church budget creates trust
There’s a lot of skepticism surrounding the church and money. We’ve all heard of the questionable methods used by ministries to raise funds and the number of ways funds have been abused. People outside the church are skeptical that the church is just after money, and people inside the church are worried that the church is too frivolous with the resources people give.
Having a budget that’s completely transparent builds trust with insiders and outsiders and disarms skeptical arguments about the church and money. It’s important to realize that the way we deal with things as pedestrian as our budget can have a dramatic effect on the way people perceive the mission of the church.
Writing a Church Budget: What’s a Budget?
As we have talked about earlier, a budget is an itemized summary of your likely income and expenses in a given time period—usually a year. It helps you set an expectation for the resources coming in and helps you prioritize its use.
Planning and monitoring your budget is the key to identifying wasteful expenditures, will help you adapt better to changes in giving, and will ultimately help you achieve your mission by setting financial goals. The clarity that comes from creating a strong budget will splash over into every area of church life.
Start with Your Income
Start with pulling in your income from the last year—the last couple years if it’s available. If you have multiple years to look at, do you detect an upward or downward trend? If it’s upward, by how much? 5, 10, or 20 percent? That will factor into how you set your budget goals.
Where is your money coming from?
As you’re looking at past income, remember to consider every source of income. This could include:
- Offerings (naturally)
- Facility rentals
- Trust funds
Auditing income sources
Once you have all of your income sources in front of you, you can begin to look at which ones are static and which ones you have an opportunity to influence. You should also make note of any income that may be coming to an end.
One church I attended had a really large facility, and the local government would rent out some of the rooms every year to run a program aimed at taking care of the migrant workers and their families that would come through every year. This contributed an annual $20,000–$30,000 to the church budget. When the government found another building that they could use all year round, we had to figure out how to adjust for a pretty big budgetary shortfall.
These are the kinds of potential changes you’re going to want to look at—paying close attention to the areas of the budget that can be increased. Do you have facilities that could be rented or used by another church or organization? Are there drives or programs you can get involved in to increase offerings or donations?
Pay close attention when money comes in, too. If you have certain services that get more offerings, special fundraisers that you do once a year, or seasonal income, make a note. It will help when you’re performing your quarterly audit to know where you should be at various points in the year.
Take advantage of this easy increase
If you haven’t made a strong push toward mobile giving, the time has come. Fewer people coming to your church every week are carrying cash or checks anymore. Upwards of 80 percent of them have mobile devices that they’re comfortable using for making purchases and doing their banking. You’re missing out by not helping them get more comfortable with mobile giving.
Churches like Angelus Temple in LA have seen weekly increases of 15 percent by encouraging mobile giving.
Set Your Projected Income
Once you’ve audited all of your sources of income and considered your trending revenue for the last few years, it’s time to set a projected income from each source and a total for the year.
Budgeting for an increase
If your revenue the last couple years has been trending up, plan for your income to go up again. If the trend is 15 percent, talk to your people about planning for at least a 20 percent increase. It’s important that your budget be a faith-filled document. You want to set it just outside of your reach—this gives your people something to rally around and gives room for God to move.
As you get more comfortable getting your church to rally behind goals, learning to create momentum, and finding interesting ways to bring in funds that are lacking, you can set more ambitious goals. But for now, start with a modest increase above your trend.
What if we’re trending down?
If your church has been trending down, the same idea applies. You want your budget to reflect your faith that God has plans for your church and its effectiveness. Maybe your act of faith could be planning a budget that’s flat with last year. Or maybe you want to dream big and budget for an increase of 2–5 percent.
Whatever you do, don’t budget for another decrease. Cast a faith-filled vision for your budget.
Set Your Budget’s Expenses
Now that you have your projected income, it’s time to plan for expenditures. How do you intend to spend the income you take in this year?
Look at last year’s expenses
This is the best place to start, so I hope you have good records. In what areas did you spend your income from last year? If you broke your expenses down into the following categories, what percentage of your income was spent in these (or similar) buckets:
- Office expenses
- Kitchen expenses
- Ministry-related expenses
- Pastoral needs
- Educational ministries
Did the percentages spent on these various line items reflect your missional priorities? If you lived in an ideal world, how would the percentages break down differently?
Are there areas that deserve to be cut down? Are there ministries or staff areas that need to be increased? Are there ministries that need to be started? Staff positions you dream about hiring for?
Begin plugging numbers into these items until the expenses match your budgeted income. If you can’t make the numbers work, you will either need to cut out some of the expenses or make a group decision to raise your budgeted amount.
When your income and expenses match, you have a budget. Congratulations!
Auditing Your Budget
Anyone can make a budget. The key is working your budget and ensuring that your income and expenses are still aligning.
At least once a quarter, you should just go over the line items in your budget and see how you’re doing. Have you had some surprise expenses? Did you offset it with budget decreases elsewhere? Have you brought in the income you were hoping for? If not, how close are you, and do you need to cut your budget back a bit?
There needs to be a decided protocol for what you’re going to do with extra income or shortfalls in income. When you have a big increase in giving because of your new Pushpay app, is that going into savings, a particular ministry, or a new staff member? If you need to make up a budgetary shortfall, do you have a plan in place to raise more funds or cut some expenditures?
Keeping your church abreast of your audits is part of the process of keeping a transparent budget. If you’re blowing your budget out of the water, take the time to celebrate with your congregation. If you’re falling short, it’s time to set a collective plan for turning it around.
Your Church Budget Is Your Doorway to Ministry
Writing a church budget isn’t difficult, but it is important. It’s the only way to ensure that the resources you have are meeting the priorities that your leadership team has set. Without it, you are at the mercy of every emergency, idea, and request you receive.
Once you develop the skill for writing and maintaining a church budget, you’ll find that it gets easier—and becomes an indispensable part of your ministry. Another irreplaceable facet of ministry involves teaching generosity effectively without alienating your community. Read the free ebook, Teaching Your Church To Give, to learn how other forward-thinking churches are nurturing generosity within their communities the right way.