Proven Principles That Lead To Healthier Finances
When people see their church being led intentionally and efficiently with wise financial decision making, they will become incredibly generous.
Unfortunately, many churches make unwise decisions when it comes to budgeting and planning that result in regular cuts and spending freezes.
Churches can operate with enough healthy margin that will prepare them for some of the amazing opportunities God will send their way. It only requires following a few proven principles.
This week on the podcast we conclude our four part series on financial challenges that churches face today. Chris Hodges from the Church of the Highlands joins me to talk about how churches can become more practical in financial planning.
Specifically you will learn:
- Proven principles that have enabled Church of the Highlands to expand to 22 locations (half with buildings that were paid for with cash)
- Key financial strategies Church of the Highlands has used for budgeting and financial planning
- Practical advice on how Church of the Highlands has been able to experience financial margin that has enabled them to become extremely generous while still taking advantage of key opportunities
- Tips for determining how much to budget for buildings and staffing
- Strategies for churches who may be struggling with finances
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Links & Resources from the Episode
- The Unstuck Process
- Funding Ministry with Joe Park | Part 1
- Money Management for Churches with Dan Dorner | Part 2
- Strategic Financial Planning with Jill Mutimer | Part 3
- The Money Series: How Much Should Churches Spend on Their Staff?
- The Money Series: It’s Not the ’80s Anymore! It’s Time to Talk About Church Giving
- 29 Mistakes Churches Make with Their Money
- Church of the Highlands
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Chris: 00:00 I decided that I wanted to launch this church but start it with some unique money principles. In fact, like we wrote into our bylaws that a budget would be based off of 90% of the previous year’s income, which by the way, it’s what we ask people to do. We ask people to live on 90%. When we’re asking them to die, we’re asking them to live on 90%. But churches don’t do it. How can you ask them to do it if you’re not willing to do it? So I said, let’s learn how to live on 90% of the previous year’s income so you go into every year with margin and then if the church grows financially, the margin just increases.
Sean: 00:32 Welcome to The Unstuck Church Podcast where each week we’re exploring what it means to be an unstuck church. When budgeting season hits, do you get excited for how your church can thrive? Or do you dread walking through tight resources and living by faith that more might come in? Could it be possible that developing your budget could become one of the most exciting times of your ministry year? This week on the podcast, Tony is joined by Chris Hodges, Senior Pastor at Church of the Highlands, for a conversation on how his church creates their ministry budget, some practical examples of how they budget and why their process has catalyzed their ministry. Make sure before you listen to subscribe to get the show notes in your inbox. Each week you’re going to get one email with our leader conversation guide, all of the resources we mentioned in the episode and an archive of all of our past podcast resources. You can sign up by going to theunstuckgroup.com/podcast. Now, let’s join Tony and Chris Hodges for a conversation on budgeting so your church can thrive.
Tony: 01:32 Today’s conversation—I think it’s going to be one of the most practical conversations we’ve had on the podcast. And specifically we’re in this money series and gosh, I couldn’t think of a better a person to bring into this conversation than Chris Hodges from Church of the Highlands. Chris, welcome to today’s conversation.
Chris: 02:03 Yeah, thank you Tony. So glad to be here.
Tony: 02:04 Now, the assumption is going to be the topics we’re talking about Church of the Highlands can do these things because now they’re years into their journey and thousands of people are already showing up. And so, can you for the people who don’t even know your story at Church of the Highlands, go back and kind of lay the groundwork for where you’ve been to where you are today, Chris?
Chris: 02:29 Sure. Thanks again for letting me be a part of this and it’s a subject that I’m very passionate about and it’s important to get right. So the church now is 18 years old and I was an associate pastor 18 years ago before that. So I’ve been serving on church staffs for a long time. When we started Church of the Highlands in 2001, there really wasn’t any church planting or anything. There weren’t any books, conferences, and there was no money anyone was dishing out for you. They had Tony, what I used to call the y’all go ahead ministry. They bring you to the front of the auditorium and pray for you. And that was the whole church planting plan. But I did have the fortune of being raised by my dad who was the best money mind I ever knew.
Chris: 03:19 He’s now with the Lord. And he just taught me budgeting. He taught me that from, I mean, I’m talking like eight to 10 years old. So some of the principles that I brought into the church world, I learned very young from my dad. And so I have to give a little shout out to him. But, I always believed that the church should be run a little differently as it relates to money. I never liked the campaigns. I never liked the fundraising. I just didn’t like some of the things that I’d seen, growing up. So I decided that I wanted to launch this church but start it with some unique money principles. In fact, like we wrote into our bylaws, that a budget would be based off of 90% of the previous year’s income, which by the way, it’s what we ask people to do.
Chris: 04:09 We ask people to live on 90% when we are asking them to give. How can we ask them to live on 90% if our churches don’t do it. How can you ask them to do it if you’re not willing to do it? So I said, let’s learn how to live on 90% of the previous year’s income. So you go into every year with margin and then if the church grows financially, the margin just increases. And that simple little principle, and a couple of others, is part of our story. So we were portable for six and a half years to get to the rest of the story quickly. We were portable for six and a half years and with that one principal and being very generous to missions and church planting, we saved $16 million in six and a half years.
Chris: 04:54 And so we just learn how to run church very efficiently. And the people when they saw that, they were incredibly generous because they saw how fruitful and intentional and generous we were to causes that matter. And so, when we found our first building project, it ended up being 128 acres of property because back then we had the model of the big auditoriums and we thought we needed that much land and we paid cash for the land and then cash for all of the development of the property. Needed to borrow $15 million to build the first building. But based that off of being able to pay the note in five years if the church didn’t grow at all. Of course when we moved in the facility, it’s a 2,400 seat facility. We came in with about 4,500 people and it literally went to 9,000 in about three months. We paid it off. And we’ve never been in debt since. And so even to this day, we run the church on about 60 to 70% of the income and our margins are greater than ever before. We’re able to be very, very generous and build all of our buildings that we’re doing now with cash. So that’s the quick story.
Tony: 06:10 And then catch us up to speed today. You have locations really throughout Alabama. How many locations now Chris?
Chris: 06:16 There are 22 locations and about half of them have buildings now that we paid for with cash. And then for the other ones our model is the same. We’d like to keep them portable for five or six years, seven years at the most, and then build them a building with cash. So that’s still the model today.
Tony: 06:33 And that is just an amazing story. And what a reflection of God’s blessing on your ministry too. I mean, when it’s evident that the church is impacting thousands of people’s lives and God has just faithfully provided for the great ministry that’s happening there. So let me go back. I mean, you said it in passing. We’re going to unpack this a little bit further. When I work with churches, Chris, more commonly, what I see in almost every instance is when a church goes into planning mode for the upcoming budget year, they look at how much money has come in over the last 12 months. Then they estimate how much more they’re sensing will come in over the coming 12 months and they establish a budget. They would say in faith what God’s going to provide based on what they project will come in with growth and giving or attendance or both. What I think I heard you say is not only are you budgeting on 90% it’s 90% of what actually came in the previous 12 months. So there’s no guessing in that. It’s just a simple math formula. Did I, did I understand that correctly?
Chris: 07:51 You understood that exactly. In fact, again, we wrote it into the bylaws of the church. So we can’t change that without changing our bylaws. We are committed to the principle, Proverbs 21:20 says in the house of a wise person, he has stores of choice, food and oil. The fool spends all they have. So I think margin is your best friend. I think margin’s your best friend in a lot of areas. It’s your best friend in your time. So, if you’re going somewhere and it takes 30 minutes to get there, leave 45 minutes early and you’ll see the drive will be more peaceful. This same principle is true with money. If you project, how much, or how long is this going to take? It’s called upward projection. You know, you’re going to end up in a traffic jam somewhere and you’re going to be late and then now you’re under pressure. And when you’re under pressure, I think you preach differently. I think you lead differently. I told the Lord I never ever wanted to be behind the pulpit needing that Sunday’s offering. You’re just going to talk to the people differently than you would.
Tony: 08:55 So here’s what happens. And again, in the normal scenario where churches budget for more than they’ve seen come in in the past. This usually hits in May, I’m thinking maybe June or July is usually when the memo comes out from the finance director or the treasurer that basically does two things, freezes the spending because we’re behind in giving and then start to process where we have to figure out what are we going to cut in the budget so that our financial ends actually meet. What does your June and July conversation look like? Because I have to guess in most instances there’s more money coming in than you’ve planned to spend. What does that conversation look like?
Chris: 09:41 Yeah, we’ve never had a year where the finances haven’t grown. So whatever that growth is, plus the 10% margin is money without a name on it. Now we don’t say that we spend it all. That margin isn’t savings. Margin is just uncommitted money. It’s money without a name. It’s, discretionary. So what does it look like? It looks like this. That opportunities come and you get to say, yes, that’s that. And that’s the position you want to be in. And that’s the real position of faith, I feel like my job is to posture the organization with health in two areas, in money and in leaders. And then God will bring you opportunities you never planned on in January when you made the budget. Things that now you get to say yes to instead of being in a cutting mode.
Chris: 10:33 That’s way more fun. And honestly, I think it puts you in this position. John Maxwell says, when opportunity knocks, it’s too late to prepare and it’s true. And God’s going to bring you great opportunities. And I could tell you story after story how facilities came available or property came available that because there were margins, we just said, yep, let’s do it. That’s how you know. Or, on the other hand, a tragedy happens. A tornado hits our state. We didn’t take an offering where we had $500,000 to just say, Hey, let’s just help them today. I get to tell the people, let’s start helping people right now. And it just postures you in a better place.
Tony: 11:12 So, Emily and I, we’ve had a similar philosophy around budgeting for our household as well. And what I’ve seen over the years, in order to spend less than we know will be coming in or has come in the past, we’ve had to make some pretty tough decisions. As an example, none of our kids have ever played club sports. We have four great athletes in our in our family, and I know other families have chosen to do that, but it was an expense that we couldn’t afford based on the money that we knew was going to be coming in. And, we just had the conversation again a couple of weeks ago and I just said, it’s just such a sad thing that our daughter didn’t have other parents because they were stuck with us. But my suspicion is in the context of the church’s ministry Chris, that it’s forced you in a way with that parameter to be more disciplined. And can you give some examples of some maybe tough choices you had to make, especially early on, to make sure that you were creating that margin.
Chris: 12:17 And by the way, anyone who says, yeah, but you know, you have all this now the principles that we were doing early on, we’re still doing right now and the ones we’re doing right now, we were doing early on. So it works. People say, well, it works now because you have everything, it was working when we had nothing. So let me throw that out there. But yes, what we did, Tony, we did, two things. We created a floor of what percentage that we were going to give away. We made a decision early on, no matter what, we are going to tithe, we ask people to tithe so the church is going to tithe and that we would give the first 10% of the income of the church to help others.
Chris: 13:01 We built a missions portfolio. And what I think Jesus asks us to do in Jerusalem, Judea, Samaria, and the uttermost parts of the earth to meet. That means your local cities, your nation and your world, that you should have a generosity portfolio that you’re going to do first. And so we created a floor of 10%. We will never give less than that. And it would always be the first 10%. That’s a discipline. It takes discipline to live that way. So literally on a Monday, when they count the offerings, the first 10% goes that we were going to give away. Again, it’s what we ask people to do. Second thing is we created a budget ceiling in two areas. We created a budget ceiling that salaries will never go beyond. This percentage was salaries. We will never go beyond this percentage with buildings. So a floor with generosity and a ceiling for those two areas, because in my experience, those are the two areas that churches tend to do more than they know they should.
Tony: 14:22 Okay. Can you share, you don’t have to, by the way, those percentage ceilings for those two areas?
Chris: 14:24 Both were 35% but never spend more than 35%. And by the way, that’s 35% of the 90% of the previous years income. So with salaries it causes us to be disciplined to hire better and to raise up more teams. So now we have actually a little more than half of our church in a volunteer position. We call it the dream team because, we had to honestly, and now it’s probably one of the best things, honestly, that people don’t know about us that we do really, really well. So it forced me not to hire people to do jobs, but to hire people to lead teams because the budget was limited. But it also created this great margin on the other side and we discipline ourselves and say with buildings, that’s why we were six and a half years and 4,500 people before we ever had our first building. Why? Because we had created this ceiling. We’re never going beyond that. But how it turned out it looks like the most genius decision ever when honestly we were just really being disciplined to a principal.
Tony: 15:17 All right, so here’s the challenge. You’ve been living with these principles for how many years? 16 years. Is that what you said? 18 years. There are going to be pastors that are hearing about these principles for the very first time now and currently their financial plans don’t look anything like you’re describing. So what are the first steps you would recommend pastors or church leaders to consider if they need to move in the direction that you’re describing, Chris?
Chris: 15:49 So they know the answer because it’s the same answer if a person comes to them and says, I want to start tithing and I want to get out of debt, and whatever answer you would tell that individual is what you need to tell the church. So the first thing I would tell an individual is, Hey, start tithing or you know, you’ve got to create some, some disciplines in your spendings that you can honor God with your first. So I would say the same thing to a pastor. Hey, let’s start with honoring God by being generous to others first and just watch what God does. By the way, when you do that, and then just like I would tell a person who’s never tithed in their life, gosh, I can’t give 10% well then start with 1% so the same thing I’d tell a pastor, I would say, well, okay, maybe you can’t do a 90% margin right now, but you can start.
Chris: 16:35 We can discipline ourselves and find 1% margin and then the next year have a 2% margin in the next year. Have a 3% margin and it doesn’t, honestly, take long. And I’ve done this literally with hundreds of churches and I’ve taught these principles to a lot and I’ve worked with them personally and it’s very, very doable when you get the buy in of the whole team. But the cool part is Tony it honors God. So now God’s involved and the people are watching and people’s generosity to the church increases. And so a lot of things start coming into motion now when you do these natural principles.
Tony: 17:14 So my suspicion is for most churches that are going to start to take these steps toward getting to health, when it comes to creating margin, the biggest area that they’re going to have to address is probably going to be staffing. Chris. So let me give you this scenario. You know, you need to make some reductions when it comes to your staffing budget. If it were you, would you make just across the board cuts and let everybody be a part of feeling the impact of the reduction or would you evaluate your staffing and determine what are the roles that we need to do without so that we can reduce our overall staffing budget and take care of the staff that are really going to help us move forward. How would you, if you were the pastor having to make that decision, how would you address that?
Chris: 18:07 Well, I would get everyone’s buy in, first of all, whenever you make cuts you want to always build a coalition. You want to build a team and you want to get everybody’s buy in. So I would bring in the department heads and I would not do it across the board because not all things are equal. So I could do without some things, but there’s some things you cannot do without. So it’s not equal. So I wouldn’t adopt that principle, but I would get everyone’s involvement. And then another thing is we have to create a volunteer culture. We just have that. If I could just say so, this might be too sassy.
Tony: 18:43 We like sassy on the podcast though, Chris.
Chris: 18:45 Okay. Well it’s lazy though to every time you need something done to hire somebody, it’s a lot harder to raise them a volunteer. But that’s the better way. Again, we hire people to lead teams, not do jobs. And so, we have to create this volunteer culture. And Tony, we still have it today. We have the ability to hire anybody we want. And we still have people that volunteer in our offices. We have people who volunteer counting the offering on a Monday. These are people who’ve gone through our volunteer growth track, our steps to being a part of the leadership of our church and to discover their skill in administration, that is their gift. And they come and say, well then let me serve in the office somewhere. And so we have this kind of people everywhere and it really can be done.
Chris: 19:32 And honestly, the people want to do it. It’s already hardwired in them and gifted every person in the church to be a part of that church family. And because the same thing as if you have children in your home and you hire somebody to mow the lawn, well I have five kids and this is their house too. Why not let one of my children take on that responsibility? You know? And so it’s the same concept that I think is so important. So you’re right, salaries is probably the first area we know ,Jim Collins says hire five work. I’m like 10, pay him like eight. There you go. Or to get more high quality, you know, people who can really have higher capacity, and who can lead teams of volunteers and get a whole lot more done. So that’s kind of our philosophy. And of course you have to do it slow. The hard part about this is that we’re not just an employer. We’re their pastors too and I know that and I know that is tough.
Tony: 20:32 All right, Chris, we really appreciate you sharing these principles. I mean, we could talk a lot about other great things that are happening at church of the Highlands, including your growth track and your dream team. But for today in this money series, this has been hugely beneficial for us. Any final thoughts or encouragement you would give pastors, as they’re considering the principles we’re talking about today?
Chris: 20:56 Well, yes, I would, my philosophy of anything in church is to find proven models that work so you don’t have to go out there and reinvent this. This is already being done. And then get the influence of the model that you’re going to buy into. I can tell you so many areas where in our small groups we learned from these models over here, these churches that were doing it way better than us and we let them mentor us and we built relationships. And that’s one of the things I’m passionate about is churches helping other churches. And that’s what I love about what you do. It’s that, you know, there’s a collaboration going on now in the body of Christ that we didn’t have 20 years ago, where if I have something that works, man, I want to share it with you. And so I would say not only to the pastors that are listening, but any leader that if you’ll find models that you believe in, in principles that you believe in, you can develop a relationship with those people and learn and grow from those. And it’s an ongoing thing. So we have hundreds of pastors who bring their executive assistants to our campuses and meet with our financial teams to learn and grow. So there’s a lot of collaboration and I would encourage, pastors, leaders.
Tony: 22:07 All right, here’s my encouragement for the pastors. The church leaders are listening today. Don’t carry the weight of this conversation on your own shoulders. The great thing with podcasts is you can share this with your teams. And for the larger churches, listen to this podcast together with your senior leadership team and discuss the potential if you were to begin moving in this direction and then for all churches regardless of size, I think it would be very beneficial for you to take this podcast and to share it with your entire elder board, your financial committees at your church, whatever that looks like. Just to hear the benefit of creating margin and the impact that could have on your ministry. Have that conversation together with the staff and lay leaders in your church so that you’re not having to feel the burden when it comes to finances. Chris, thanks again for joining us today.