If budgeting for a business is important, so is creating your church budget. Operating with a budget is a crucial element if you want to experience church growth.

Operating with a budget is a crucial element if you want to experience church growth.

It’s vital therefore to see it as more than just a financial tool for reporting and accounting.

The budget is a vehicle to reinforce and enable vision fulfillment. It should reflect the key priorities of the church and be seen as an instrument of leadership.

First, let’s consider six good reasons to create a church budget.

1. Clarity of purpose

The process of creating a budget for your church helps you to clarify your ministry’s purpose.

As you work out how you are going to spend money on evangelism and discipleship, you refresh your purpose and call.

A budget also helps your team clarify what you are seeking to achieve in the next 12 months within your church.

2. Plan to use church finances wisely

God is a planner.

When Peter preached on the day of Pentecost, he told the crowd, “This man was handed over to you by God’s deliberate plan and foreknowledge” Acts 2:23

Paul reiterates this concept in his letter to the Ephesian church, “In him we were also chosen, having been predestined according to the plan of him who works out everything in conformity with the purpose of his will” Ephesians 1:11–12

God intentionally and deliberately planned that Christ would die on the cross for our redemption and the ultimate fulfillment of His will.

It is in His nature to organize, strategize and formulate plans.

Likewise, we who are made in His image should be adept at planning and intentionally living out the purposes of God in our life.

Money your church receives should be included in the annual budget and used honorably.

Good financial planning will also help you avoid a fiasco in your cash flow.

The budget is a vehicle to reinforce and enable vision fulfillment, not an obstacle. Once created, stick to your budget. You can adjust your budget as the year moves along and as needed, but not for every whim.

Life Church has a church budget sample that can get you started with your plan. Using a church budget template will make the task less daunting if you haven’t had much experience in drafting a proposed church budget.

3. Train your team

The third reason budgeting is essential is that it helps train your team.

It trains them to think ahead, exercise their financial management skills, and to budget for church expenses.

It’s quite possible that your key leaders don’t have a personal budget, which every leader should have. This may mean they need to be trained to stay on budget.

They should know what they’re saving, what they’re spending, and their source of income, as well as learning how to use faith for income and wisdom with expenditure.

It’s vital that you have a budget for personal reasons but also using your church budget can train your team in the practical processes and the principles of budgeting.

4. Share the burden

A fourth reason to establish a church budget is that it shares the burden.

Every pastor carries the burden of the church finances and I think lead pastors or senior pastors carry it more than anybody else in the organization.

When income is down they worry.

I did.

When income was up they thought wow, everything is healthy and there’s less pressure.

A robust church financial process shares that burden across your team, your board, your business manager, and your treasurer. Your team gets involved and can see where the money’s going in different areas and why we’re spending it this way. Suddenly it spreads the pressure.

I don’t think it alleviates the lead pastor from the primary pressure of being the key fundraiser.

The pastor is the lead person when it comes to raising money in the church so I don’t think you ever escape that responsibility.

But I do believe that you can share the burden through a healthy budget process so you’re not carrying it by yourself. This is best for your church.

As people focus on a budget process, across your stewardship team, and the department heads, it increases prayer.

People begin to pray about this process and what they’re doing in establishing a vision-centered church budget.

5. Goal setting

Another key reason to establish a regular budget is goal setting. Just as budgets clarify the church’s mission and assignment, seasonal goal setting is impacted by your church’s budget process.

You might decide that you’re going to reach out to local high school students and you ask, how many high school students do we want to reach? How are we going to reach them? You develop goals around this mission.

Budgets will help you focus as you raise money for church ministry. It helps you focus on your goals and it creates cohesion in your team.

6. Improved communication of church expenses

The sixth and last reason is it improves communication among church staff. The budgeting process lifts communication.

People begin to understand the bigger picture and the needs of other departments in the church.

This helps develop a culture of generosity in the church leadership.

As budgeting improves and as the pastor, the board, and the department leaders get a better handle on the budget and the finances they are able to improve communication with the church members.

They can outline projections of what’s coming up in the next 12 months and the longer term, giving the congregation a greater stability.

When budgeting improves pastors start to get more confident in preaching on money.

Steps to creating a church budget process

I want to walk you through my vision-centered church budget process that I used for many years in pastoring and leading our church.

You can tweak this to suit your circumstances.

Your church might be 1000+ members, so those circumstances can be tweaked.

If your church is 70 people then you’re going to adjust it and adapt it. I want to give you the skeleton, the main process and structures and you can tweak this to suit your situation.

I love my friend Alex Cook from Wealth With a Purpose. He says every 3 years a church should do zero-based budgeting. This type of budget looks to allocate every dollar to something specific.

In other words, wipe everything out as it were and say if we were starting afresh and ask, how would we spend our money?

I think that’s a great thing to do every few years for a church just to think about it and go wow, how would we spend our money if we were starting again?

Here’s my process.

1. Establish a stewardship team

First, establish a stewardship team. I love this name.

Instead of a finance committee, establish a stewardship team to manage the budget process.

A stewardship team would have the pastor on it, it would have a chairman/chairwoman chairing the meetings. The pastor shouldn’t be chairing this group.

It will include the treasurer and one or two people who are good with budget processes and finance processes.

The stewardship team will do more than allocate funds for the church and decide on budget cuts. Making budget cuts and deciding what to spend on should be included in their function, but shouldn’t be their entire purpose.

I like to see them involved in the annual giving campaign and looking at ways of boosting the church’s giving. I also look to see them shoring up the income and expenses of the church.

A stewardship team of four or five people can set the church up for a healthy, vision-centered budget process.

2. Communicate primary vision and strategies to the stewardship team

Once you’ve got your stewardship team the pastor needs to communicate the primary vision and strategies to the stewardship team and set some priorities of what the church needs.

This year we want to boost our small groups, so I want the money to pour into small group leaders.

This year we want to boost up the training of greeters, so I want some finance for that.

This year our website needs work, so we’re going to focus on web development.

A pastor will communicate the primary mission of your church and strategies to the stewardship team. Not down to nitty-gritty details, just the overall big picture.

So, let the vision focus the budget. Don’t allow the resources, or lack thereof, drive the process.

3. Communicate primary vision and strategies to department leaders

Thirdly, the pastor communicates the primary vision and strategies to department leaders.

These are the leaders bearing the operational burden of the church. Those who help your church by leading the children’s department, music department, media, youth, greeters, seniors, women, and men.

The pastor outlines the primary focus for the year ahead. It might be on visitors or small groups. So you’re going to tailor the things that you’re doing in your department so we can fulfill our primary goal as the church grows.

This requires the pastor to establish primary focal points well ahead of time, so they can allocate an effective budget number.

4. Have department leaders create a budget

This leads me to my next point which may be a bit of a shock for you.

Department leaders should submit a program budget three months before the end of the financial year, as a minimum. In other words, get well ahead of the game.

The pastor needs to be further ahead of this three-month deadline and consider the church’s primary focus for the year ahead.

He should talk to the board and team and clarify his focus, which he can communicate to his department leaders and stewardship team.

You should never wait until the last minute to set up the next financial year. Every church needs a budget, regardless of size.

Smaller churches are going to have more wriggle room on this timeline. However, as the church gets larger, you’ll need to utilize a good timeline and never create your budget last minute.

The primary thing is to have a plan in place. You can always adjust a plan. If you have no plan, everyone’s flying by the seat of their pants and it just feels like you’re playing catch-up all the time.

5. Prepare a draft budget

At this stage, the pastor has shared vision and strategies with the stewardship team and department leaders.

The department leaders have worked out their priorities and submitted their budget items.

The stewardship team kicks into gear and prepares a draft budget with projected income and expenditure.

All the operating costs of salaries, benefits, mortgage, rent, lease payments, insurance, repairs and maintenance, administration, and utilities.

All the income streams are incorporated into this draft budget.

It is also important to make provision for savings. Even if the savings regime is 1%, adopt a savings regime.

As I look back over the years of my pastoring, there’s one thing I would change around our budgeting process.

I would be far stronger at restricting salary growth and boosting savings growth. I believe this would have been more beneficial for the long-term health of our church.

Aim to move your savings level to 10% of your income, both personally and with the church. Start as low as 1% and build towards that 10%.

6. Fine-tune the budget

Fine-tune the budget with the stewardship team until it’s balanced or until you come up with an agreed faith gap.

I had more than one church budget where we’ve gone through it as a stewardship team and board and we’ve all decided that we haven’t got a balanced budget, so we’ll believe the Lord to fill the faith gap.

Should your church budget include a faith gap, you don’t want it to be millions of dollars.

You don’t want to be stupid about income. You want to use faith for income, and wisdom with expenditure.

However, I’ve seen the Lord provide for those faith gaps over the years.

At other times I’ve seen us tighten our expenditure to make the faith gap. You have to be smart about this as the year rolls on and you see your church income fluctuate.

I don’t have a problem with having a faith gap in a budget. Leave space in your budget for a miracle. Don’t tighten it down so hard that you don’t give the Lord time and room to move.

7. Present the budget

The stewardship team should present the budget to the pastor and the board. At this stage, the budget should be both detailed and big-picture.

Healthy church budgeting looks different for each congregation and depends on the size of your church.

If it needs to go to members for a vote then so be it. Some churches take it to a vote, some don’t. There needs to be an approval of the budget in that process by a board that ultimately has legal responsibility for the church.

Then department leaders are informed about the what and why behind the budget decisions.

How much they’re going to get, how much they’re not going to get.

If they are well informed, kept in the process, and can see the reasons for key decisions then they will accept the board’s final decisions on the budget.

This process will help you develop best practices in your church finances.

Budget percentage guidelines for churches

How much should we spend on what?

This is a question that I often get asked and often talk about with pastors and boards.

Churches have different approaches to their line-item budget and this infographic outlines the large range of church budget categories.

Here are my church budget guidelines when posed this question about how to spend the recurring income from Sunday offerings. Please note these church budget percentages do not incorporate missions or building offerings.

Salaries: 40% – 50%

Pastors often wonder how much of a church budget should be salaries.

I recommend churches aim to spend 40 % – 50% of their regular income on salaries.

I think you can get up to 55% for short seasons, as long as you have very minimal debt or lease costs.

Ministry Areas: 15% – 20%

15% to ministry budgets such as youth, children, worship, and so on.

Facilities: 15% – 25%

Debt repayment, lease payments, utilities, and repairs and maintenance. You may raise separate funds for debt demolishing. We did a big mortgage buster one year with a one-off offering to reduce our mortgage in one big hit.

Savings: 10%

Saving 10% will enable you to build healthy cash reserves.

Once you’ve topped up your cash reserves through savings and your cash reserves are healthy, you can look at what is ‘hot’ in your church and pour out of that 10% into what is already going well.

For instance, if your children’s church program is going well, you can take part of that 10% and resource it at a higher level. Put petrol on the fire.

If your small groups are exploding then put some money into training leaders and developing a bigger and better small group program.

Willow Creek Community Church utilizes the following ratios to guide its budget process.

no more than 50% to staffing (including benefits)
10% given away
10% for whatever God is blessing at Willow (or cash reserves)
15% to ministry budgets
15% for facilities, utilities, debt service, etc.

Given Willow Creek’s size and long tenure, you should only use these figures as a guide.

How Much Should We Give Away?

Church leaders wrestle with this question.

Should we be giving away a percentage of our income?

Some churches do it, they believe that they should give 10% of their income away.

I’m not a fan, although our church used to do it.

10% of our income went into missions and the thing I didn’t like about that was it was like secret giving. Many of our members didn’t realize 10% of their giving was going to our missions program.

People didn’t have a heart connection because they weren’t giving directly to it.

I stopped that and created a separate fundraising program for our Beyond ministries so people could give directly to the missions programs of our church, local and global. Our heart follows our money. Build a connection between giving and the result.

You have to work out your philosophy.

I recommend churches use the Vision Builders concept when raising money for buildings, missions, and significant projects.

How Much Cash Should You Have in Reserve?

I think it’s important to include in your budget a healthy cash reserve.

You can stabilize your church’s finances by establishing a cash reserve.

Firstly, it enables a church to move smoothly through the normal seasonal variations in cash flow.

When you’ve got a cash reserve, it allows you to move through seasons of pressure where your church spends more than it’s receiving. If big givers leave, people lose some work or lose jobs, it allows you to cover that seasonal variation.

Secondly, it helps in managing church crisis brought about by unexpected scenarios such as extensive building repairs, emergencies, or economic recession.

I remember once when the wooden framework of our stage got infested with white ants. We had to demolish it and construct a metal stage. It cost thousands of dollars which we didn’t have budgeted.

We had cash reserves and were able to do it.

Thirdly, unforeseen opportunities for ministry that require a cash injection.

If you’ve got cash reserves and a ministry opportunity arises then you can access those reserves. Take $2,000, $5,000, $10,000, or $20,000 take the opportunity.

Churches should hold a cash reserve of 60 to 90 days of operating expenses preferably closer to 180 days.

Build a Healthy Church Budget

Budgeting for a church is a vital practice to ensure financial stability and a healthy church. Without a budget, there is no means to accomplish the work you’ve been called to.

What are you going to change in your proposed church budget?

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