When Is a Budget Too Big?
I saw a great article over the weekend highlighting the ministry of Church of the Highlands in Birmingham, Alabama. You should check out the entire article, but this particular paragraph grabbed my attention:
“The church sets its annual budget as 90 percent of the previous year’s income, to leave a 10 percent cushion in case of an economic downturn, and limits salaries to 35 percent of the total budget.”
Though I’m familiar with other churches that are pushing to lower staff salaries as a percentage of the total budget, Church of the Highlands is the only church I’m aware of that sets their budget based on 90 percent of the previous year’s income.
I’m familiar with many, many churches who take a look at the previous year’s income and then add a percentage based on their projections, prayers and hopes for what the future will look like. That may be described as the “faith factor”. I’m a man of faith as well, but I’d rather deal with the the problem of determining how to invest the extra money that exceeds a disciplined budget than deal with the challenges, stress and frustration that results when our “faith” exceeds God’s provision. (See Luke 14:28-30.)
This kind of approach to budgeting does takes discipline. What’s always amazing to me, though, is that when we create boundaries and live within those boundaries, it leads to more freedom. Church of the Highlands has been able to experience significant ministry impact because of their wise financial planning. They can do more because they’ve learned to live with less.
Are you familiar with other churches who have implemented this type of budgeting strategy? Do you agree that it has the potential of allowing a church to make a bigger impact? Join the conversation by sharing your comment.
We are getting ready to start the budgeting process for the next church year(May-April). This is my first Senior Pastor position so I am trying to do as much research as possible on these kinds of matters. One thing I’ve noticed in our small church is how individuals are willing to foot the bill for events. We’ve had two community wide events where people volunteered the time and money to make it happen without using any church funds. They seem to have the right attitude in doing this. They “own” the event in wanting to make it as fantastic as possible, but not in the sense that it’s for theirs or the church’s glory. Budgeting at 85-90% makes a lot of sense to me. Thanks for featuring these guys lately.
I think that is a great idea.
The ‘budget’ process helps ensure things like rent, salaries and other essentials that people rely on get paid.
So if it goes down, they are most likely ok, rather than having to lay off ‘needed’ staff who probably need the job!
And if it stays the same or goes up, they have a significant amount to invest into ministry and to spread the Word of God.
Amen for using our common sense that God gave us, rather than living outside our means and hoping God will pickup the pieces.
Great article.
One question though: do they budget 90% for salaries also? …that would mean 10% salary cut each year…just thinking of someone that has worked there for like 10 years. How do they juggle that part? Or how would you handle that?
Femi, they’re basing their budget on 90% of the prior year’s offerings…not 90% of the prior year’s spending. That’s two completely different numbers.
Thanks Tony. Isn’t the prior year’s offerings the source of the prior year’s spending? not all churches are fully funded in their early years.
Obviously, this formula won’t work for brand new churches. The point is that many churches budget beyond their means. This is a method to protect churches from overextending themselves.
Tony is right. It means that each department or ministry must plan on restraining their spending. It restrains the mindset of spending “anticipated increasing” of giving. Salaries or potential salary increases could be affected. That usually isn’t the case unless other cuts are made and more still need to be considered.
We have been wrestling this out at our church. What if you set a budget, enough to pay the bills and then commit to give everything above it away to other kingdom building. But set the budget at the lowest possible amount, still being generous with staff but cutting as much as possible. Then hopefully, the budget needs are met every year and the church lives on a lower percentage of the giving? Is this too naive? I just know that is how we want to live with our family’s budget- why not the church?
Jennie, I’d push back on that philosophy a little big. If you’re giving all your financial resources away to other organizations, it kind of suggests to me (and probably your givers) that the mission of those other organizations is more important that the mission of your church. I like it when churches model generosity, but I sometimes wonder if we’re not giving away the resources that God intended to use for a bigger purpose.
Good article. Heard this from them last year at a seminar. Interesting.
Our experience has always been to operate based on faith based budgeting. We understand there can be a fine line between operating by faith and acting out of stupidity. Our experience has been that we budget based on what we discern to be God’s plan for us in the coming year. We have always (5 years) ended up with a surplus each year even after we have budgeted more than the previous year. Thank God!
As we have grown we are reaching for some of these goals ourselves. Staff pay percentage etc…
Perhaps there is a different application for a small/young church vs a larger church?
Church planters especially don’t begin with the first year’s budget in the bank. So operating by faith comes natural.
Good article, thanks for sharing.
Always learning
Troy
We’ve been following this same budgeting philosophy for years. I first heard about it in Ted Haggard’s book Life Giving Church.
I’ve discovered that it’s also important to have a general idea for how to use/allocate the extra $ that comes in over and above budget. The staff all have their idea’s so it’s been helpful to have a general guidelines or philosophy for where it is spent.
I agree with Troy. I think budgeting should be based on God’s vision for your church. Henry Blackaby gives a great example of this in his Experiencing God workbook (pg.7). You have to be sure that your leadership team is in tune with God, and there is agreement with what you percieve as God’s vision.
When Jesus sent his disciples out, he told them not to take anything with them. He would supply for their needs. (Luke 9:1-6)
The bottom line is, do we budget based on what our income was the previous year, or do we budget based on what God wants to do in and through our church?
Thanks for sharing this. I love the idea, but I admit I’m quite challenged by it. We’re at the beginning of year two for our church and we used the Willow Creek suggestion year one of 10% outreach, 10% savings, no more than 50% staff, another 15% admin and the other 15% discipleship (kids, students and adult small groups). Right now we’re at under 50% in our staff budget, which is great, but we’re also under-staffed. Or at least that’s how it feels. Our admin budget is also low b/c we meet at a high school.
Articles like this are so helpful for young churches like ours b/c we have an opportunity to start with healthy habits. Thanks for challenging the norm.
I have seen terrible abuse of church budgets that feed incompetence and apathy in their staff’s. I don’t think the larger question is “90% budget or faith factor” as much as it is “What is the maximum return of saved and transformed lives as it relates to our allocation of the budget”. Allocation and distribution is the problem, if this question were asked then I think they could set their budgets at 50% of the previous year.
The churches mission is not to be an employer or rec center but to win the lost and disciple the saved. Period.
In terms of allocation and effectiveness, 84% of people become Christians before age of 18, so why isn’t 84% of the funds dedicated to children and student ministry? Just a thought provoking statement :)
Tony,
I agree with this line of thinking. It really resonates. For us, getting there is a struggle.
This is my first year as a lead pastor. About 2 months in, I was brought into the loop on our church finances…they were awful. Two years of declining attendance had taken it’s toll, plus, as far as anyone knew, in the 12 year history of the church, it had never met it’s budget. I immediately started to get fully engaged in this area. I was determined that the church could not spend more than it took in. We went through our budget and cut everything that kept us from keeping the doors open. Our team began doing ministry on a shoestring and they rose to the occasion. But we still had to make staff cuts because we were overstaffed. We cut 1 full-time pastor and 4 part-time support people.
We have developed new strategies and systems and gotten more focused than ever on being intentional about our mission. We are also being way more intentional about stewardship. We are growing in weekend attendance and have plugged dozens of new people into small groups and serving. People are getting saved-lots of great things are happening, but the money is not following yet.
If things don’t pick up this quarter, we will be faced with cutting another full-time staff member. I’m just trying to figure out how to pay the bills, much less get to the 90% like you talked about.
Any wisdom you’d like to share?
See me email message to you.
Tony,
So how does your church’s budget process work in comparison to this model?
MJ
As I mentioned, Church of the Highlands is the only church I personally know of that handles budgeting like this. We’ve talked about what it here, but that’s it at this point.