Talk about living on the edge — according to studies about church finances, most churches live on the sharp edge between being able to function effectively and not being able to pay their bills.
One study found the median church receives about 1 percent more in income than it spends. Ninety-eight percent of that income comes from annual donations since few churches have income generating activities built into their programs.
Most churches, the study found, are ill-prepared for a financial emergency. The median church has reserves equal to 7 percent of its annual income. That is less than one month’s operating expenses.
A frightening finding of the study is that the median church carries a debt equal to 41 percent of its total assets. With so little financial reserves, one monetary “sneeze” and the church could be in trouble.
Some churches live on the financial edge because of their giving patterns. In some places congregations are blessed with a few families whose tithes and offerings carry the majority of the financial load. Often these congregations do not look ahead to what might happen if one or two of those families move away or pass away.
Obviously that could drastically change the financial health of the congregation.
Boomer generation
In some churches the financial load is carried by the boomer generation which is aging rapidly. Unfortunately some of these congregations have not forecast what their giving patterns might be in 10 years given the normal changes in lifestyle.
Instead leadership looks toward a future with the similar resources as today. Stewardship is assumed instead of emphasized and indebtedness is created that could cripple the church for years to come.
Even where church growth is a reality, assumptions can be made that push the church toward the edge.
A recent article in Socius, the journal of the American Sociological Association, found “a negative relationship between (church) size and the probability of attendance.” One of the reasons, the researcher found, was that “time-stressed families gravitate to larger churches where they can pick and choose their involvement.”
Dual income families, the report argued, are much more time-stressed and don’t have as much discretionary time.
These families may join a church — frequently a larger church — but they also may participate less than others. And less participation often means fewer dollars in the offering plates.
Growing churches mean new staff members, new programs and new buildings. A Leadership Network study offered the caution that commitments to a new financial project do not always mean new money. The study reported between 20 to 23 percent of the money for the new project is really a shift in giving from the general fund to the new specific cause.
In the best of circumstances it is hard to distinguish between “old money” — what was given the previous year — and “new money” — money above and beyond what was given last year.
Every church struggles with budgeting financial resources in a way that promotes personal stewardship for its members and financial health for the church.
A new church may use practically all its income for salaries and staff support. In an established church, that percentage may be 35–40 percent. Of course the size of the church impacts that percentage.
Most resources suggest churches need to be careful when their personnel costs rise above 50 percent of their budget.
One item influencing that percentage is debt. Churches are cautioned against having more than 65 percent of their annual budget going for personnel and debt service. When that happens the church is left with too little to do the work of the church, experts contend.
One study offered ranges for major expenses: personnel, 40–50 percent; operations (including debt service), 20–30 percent; discipleship development, 10–20 percent; missions and evangelism, 10–25 percent.
Because every church is unique, every church will make decisions based on its particular values and circumstances. The ranges provide only general guidelines.
Church values are always a part of creating a healthy financial situation for the church and its members. Often those values are reflected in the church’s mission statement. That tells what the congregation has agreed to do and become. The mission statement can be a driver in the budget-making process since allocation of funds demonstrate the true values of the church and its members.
Buy-in by both members and leadership is essential for a church budget to reflect financial health for all. The budget-making process must include opportunity for the values of members to be shared and considered in light of the values reflected in the church mission statement.
That is why a church budget cannot be made in a back room by a few people. A healthy church budget, one that moves people away from the financial edge, is an agreement among all the members of the church and all should have the opportunity for input. All should clearly understand its priorities.
A growing number of churches are making a spending plan along with a budget. A budget usually allocates a percentage of funds to various causes. But electricity bills and heating bills cannot be paid with percentages. Some churches anticipate the “what if” situations and agree that some items will be the first paid in case of shortfalls in the income.
Financial obligation
Salaries, utilities, debt service and insurance are some of the most common preferred items for many churches.
I once served a church that paid its missions commitment through the Cooperative Program before it paid any other financial obligation.
Living on the financial edge is difficult. It is difficult for individuals and difficult for churches. Individually or as a church no one wants to be on a sloppily run, sinking financial ship. But perfectly balanced financial records with ample reserves is not necessarily a sign of Kingdom success.
Sometimes a church lives on the financial edge because of its ministry and service. Even then it is incumbent on everyone to do the work of the Lord decently and in order, for God is not the author of financial confusion.
Living on Financial Edge
Living on Financial Edge
Talk about living on the edge — according to studies about church finances, most churches live on the sharp edge between being able to function effectively and not being able to pay their bills.
One study found the median church receives about 1 percent more in income than it spends. Ninety-eight percent of that income comes from annual donations since few churches have income generating activities built into their programs.
Most churches, the study found, are ill-prepared for a financial emergency. The median church has reserves equal to 7 percent of its annual income. That is less than one month’s operating expenses.
A frightening finding of the study is that the median church carries a debt equal to 41 percent of its total assets. With so little financial reserves, one monetary “sneeze” and the church could be in trouble.
Some churches live on the financial edge because of their giving patterns. In some places congregations are blessed with a few families whose tithes and offerings carry the majority of the financial load. Often these congregations do not look ahead to what might happen if one or two of those families move away or pass away.
Obviously that could drastically change the financial health of the congregation.
Boomer generation
In some churches the financial load is carried by the boomer generation which is aging rapidly. Unfortunately some of these congregations have not forecast what their giving patterns might be in 10 years given the normal changes in lifestyle.
Instead leadership looks toward a future with the similar resources as today. Stewardship is assumed instead of emphasized and indebtedness is created that could cripple the church for years to come.
Even where church growth is a reality, assumptions can be made that push the church toward the edge.
A recent article in Socius, the journal of the American Sociological Association, found “a negative relationship between (church) size and the probability of attendance.” One of the reasons, the researcher found, was that “time-stressed families gravitate to larger churches where they can pick and choose their involvement.”
Dual income families, the report argued, are much more time-stressed and don’t have as much discretionary time.
These families may join a church — frequently a larger church — but they also may participate less than others. And less participation often means fewer dollars in the offering plates.
Growing churches mean new staff members, new programs and new buildings. A Leadership Network study offered the caution that commitments to a new financial project do not always mean new money. The study reported between 20 to 23 percent of the money for the new project is really a shift in giving from the general fund to the new specific cause.
In the best of circumstances it is hard to distinguish between “old money” — what was given the previous year — and “new money” — money above and beyond what was given last year.
Every church struggles with budgeting financial resources in a way that promotes personal stewardship for its members and financial health for the church.
A new church may use practically all its income for salaries and staff support. In an established church, that percentage may be 35–40 percent. Of course the size of the church impacts that percentage.
Most resources suggest churches need to be careful when their personnel costs rise above 50 percent of their budget.
One item influencing that percentage is debt. Churches are cautioned against having more than 65 percent of their annual budget going for personnel and debt service. When that happens the church is left with too little to do the work of the church, experts contend.
One study offered ranges for major expenses: personnel, 40–50 percent; operations (including debt service), 20–30 percent; discipleship development, 10–20 percent; missions and evangelism, 10–25 percent.
Because every church is unique, every church will make decisions based on its particular values and circumstances. The ranges provide only general guidelines.
Church values are always a part of creating a healthy financial situation for the church and its members. Often those values are reflected in the church’s mission statement. That tells what the congregation has agreed to do and become. The mission statement can be a driver in the budget-making process since allocation of funds demonstrate the true values of the church and its members.
Buy-in by both members and leadership is essential for a church budget to reflect financial health for all. The budget-making process must include opportunity for the values of members to be shared and considered in light of the values reflected in the church mission statement.
That is why a church budget cannot be made in a back room by a few people. A healthy church budget, one that moves people away from the financial edge, is an agreement among all the members of the church and all should have the opportunity for input. All should clearly understand its priorities.
A growing number of churches are making a spending plan along with a budget. A budget usually allocates a percentage of funds to various causes. But electricity bills and heating bills cannot be paid with percentages. Some churches anticipate the “what if” situations and agree that some items will be the first paid in case of shortfalls in the income.
Financial obligation
Salaries, utilities, debt service and insurance are some of the most common preferred items for many churches.
I once served a church that paid its missions commitment through the Cooperative Program before it paid any other financial obligation.
Living on the financial edge is difficult. It is difficult for individuals and difficult for churches. Individually or as a church no one wants to be on a sloppily run, sinking financial ship. But perfectly balanced financial records with ample reserves is not necessarily a sign of Kingdom success.
Sometimes a church lives on the financial edge because of its ministry and service. Even then it is incumbent on everyone to do the work of the Lord decently and in order, for God is not the author of financial confusion.
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