The Complete Guide to Creating a Church Budget
When it comes down to it, creating a church budget is about stewardship. Your budget is a vital strategic document . Its purpose is to help your church make the most of the resources that have been entrusted to you.
Creating a budget on this scale may feel uncomfortably foreign, especially if you do not have a background in accounting. As a church leader, you might be thinking, “This is not what I signed up for at all.” As a church leader, however, you have a responsibility to lead your church financially as well as spiritually.
That does not mean you have to take this on alone. Creating a budget for an organization is complicated. If you do not feel confident that you have the expertise to avoid mistakes and do this right , you should honor the trust your congregation has placed in you by bringing other people on board.
We are going to walk you through the basics of church budgeting, so you feel equipped to tackle this important document.
Here is what we are going to cover:
- Does your church really need a budget?
- Who should create your church budget?
- How do most churches spend their money?
- How to calculate your total income
- How to evaluate your expenses
- Reallocating your resources
- Church budget template
- Tracking your budget
- When should you reevaluate your budget?
For starters, let us address a question you might be asking yourself right now: do I really need to do this?
Does your church really need a budget?
If you do not use a formal system to manage your own finances at home, you might be tempted to think you can manage your church’s finances without a budget. Depending on your church’s situation, you might be able to get by without one—for a while.
The reality is, however, creating an official budget is a “coming of age” moment for your church. It is a commitment to plan ahead, to carefully think through significant financial decisions, and to stop guessing how choices will impact your church’s bottom line. If you want to maximize your resources and do everything you can to grow, then a budget is a must.
This is where you plot out how you will use your resources to fulfill your church .
And here is why having a budget is so important:
1. Church income fluctuates
Most churches see spikes in attendance and giving around Christmas, Easter, and Mother’s Day, as well as other times of the year like the back-to-school season. Most churches also see dramatic drops in attendance during the summer months as members go on vacation (The infamous “Summer Slump”).
Even if 100% of your members have signed up for monthly giving, your church’s income is naturally going to fluctuate throughout the year as visitors come and go. If you do not plan for those changes, your church’s financial situation may feel like feast or famine, where you make choices based on whatever happens to be in your accounts each month.
A budget helps you prepare for seasonal trends, making it easier to create a buffer against future slumps and plan for months where your expenditures may be higher (such as Christmas).
2. Church expenses can easily get out of control
As churches grow, the number of people with access to the church’s finances tends to grow too. You might have several ministries that each need to make purchases independently, and multiple staff people with the authority to buy things on behalf of your church.
A budget ensures that everyone is on the same page about how much money can go toward which areas and what kinds of purchases. It also reduces the burden on any one person to be the arbiter of your church’s finances.
3. Budgets hold you accountable
When you are “in the moment,” it is easy to make exceptions, let things go, and justify unnecessary expenses. A budget is something you carefully and prayerfully plan and agree on as a team before you find yourself in situations where you might spend more than you mean to. And again, it reduces the burden of particular people to “make the call” on every purchase, because everyone will be more aligned on the big picture.
Budgets also give you a clear benchmark when you review your financial decisions each month.
Did you go over your budget? In which areas? Why? How does that affect the coming months? How do we prevent this from happening again?
It is a lot harder for your staff to hold themselves accountable if there is no defined amount they are supposed to spend, and no context for how everything fits into your church’s finances.
Who should create your budget?
Creating your church’s budget does not have to fall on the shoulders of one person. Depending on the size of your church, it may be unreasonable to create that expectation. Ideally, you will form a budgeting committee with the necessary skills and insight into your church. The people leading the budget planning need to have:
- Authority to make decisions
- Access to all your church’s financial records
- Insight into how major expenses fit into your vision and mission
The scale of your church’s finances, the number of major decision-makers on your staff, and the financial expertise of those decision-makers will help you determine how many people need to be “in charge” of the process. For a small church with uncomplicated expenses, a single person may be just fine—just make sure they have all the support they need.
Should your budgeting committee be staff-only?
Ideally, at least one person on this committee should have a background in accounting. If no one on staff has that expertise, there may be someone in your congregation who can help. Otherwise, you may want to have an outside consultant review your budget or provide input before you get started.
Creating a budget that involves this much money is worth getting professional expertise.
Should the whole staff be involved?
Not everyone on staff has to be part of your budgeting committee. Anyone who makes purchases on behalf of the church, however, should have an opportunity to talk through what they need each month and share how potential cuts would affect them . The committee should speak with anyone who the budget will directly impact, or who can help or hinder your church’s ability to stick to your budget.
What about the congregation?
Regardless of who the actual decision-makers are, the entire process should be as transparent as possible. If members want to know more about what is going on, give them the opportunity to share their input and understand the process.
This creates buy-in and helps build trust, because your members can see the level of thought going into major decisions and they know that their voices will be heard. It may also give you valuable insight into what your congregation considers important.
How do most churches spend their money?
It might be helpful to think about how other churches allocate their resources when creating your own budget. This should not dictate your budget or even necessarily serve as a template, but having these benchmarks could be useful as you work through your own needs.
You may even find that seeing how churches spend their money drives you to do something different. Perhaps some of these expenses will seem ludicrous to you, or they will reflect priorities that do not align with your church’s mission and vision.
In 2014, Christianity Today’s Church Law & Tax Group surveyed 1,605 churches to see where their money was going. Here is what they found:
Salaries and wages: 47%
Ministries and support: 9%
Building: 7%
Utilities: 7%
Maintenance and cleaning: 5%
International mission support: 5%
Domestic mission support: 4 percent
Office and administration, postage, and equipment and supplies: 4%
Property liability insurance: 3%
Denominational contributions and fees: 3%
Cash reserves: 2%
Debt: 1%
Travel: 1%
Other: 1%
As you consider your church’s priorities and examine your current income and expenses, you may find that your budget does not bear much resemblance to the figures above. These are just averages, and they do not account for differences in church size, number of ministries, number of staff, total income, maturity, etc.
To create your own church budget, you will need to start by determining how much money you have coming in—your total income.
How to calculate your total income
Church income can fluctuate quite a bit throughout the year. That makes creating a budget a little tricky, and it becomes extra important to have accurate records of your past expenses.
The further back you can go, the better. Having years of data will help you map the overall trend. Is your income increasing? Decreasing? By how much?
Ideally, you want this information broken down by months, so you can compare seasonal trends as well. How much does giving really fall off every summer? Knowing this will help you decide how to compensate for those dips in giving throughout the year.
Possible income sources to calculate
Your church may have some unique income streams, such as a daycare you run throughout the week, other services you provide, or ways you rent out your facility when you are not using it. Keep in mind that some sources of income may be temporary. If you are currently renting your facility to another organization, for example, that income may not last beyond your lease agreement.
Be sure to include all of your income sources in your calculations, even if they are not all consistent every month. You want to plan your budget based on your total income, not just obvious, year-round sources like monthly tithing.
Here are some general income sources you may have:
- General giving
- Giving for specific funds (missions, building, ministries, etc.)
- Facility rentals
- Services
- Interest
Once you have collected all of your financial records, it is time to break out the spreadsheets and organize this high level information in a useful way (more on that later).
What if you don’t have all of last year’s data?
If your church is so young that you have only recently started keeping financial records, you are going to have to be more conservative with your budget . Try to gauge whether you are currently in a “slow” season in terms of giving, and pay close attention to your temporary income streams.
A budget that is based on insufficient information will probably need to be adjusted regularly, so keep that in mind as well. You probably will not be able to set your budget in stone until you have more data, so be sure to keep thorough, accurate financial records from now on, so you can plan wisely in the future.
How to evaluate your expenses
Similar to calculating your income, you will want as much data as possible to evaluate your expenses. Compared to your income, however, this task may feel mind-numbing, because you will need to group your expenses based on which divisions of your church they belong to (facilities, salaries, children’s ministry, etc.) and identify which types of expenses they represent (supplies, equipment, curriculum, etc.).
This lets you see your expenses at a high level and hone in on where all your money is going within a specific ministry, team, or category. If more than one branch of your church uses a piece of equipment or supply item, however, keep that under a broad category, rather than attributing that expense to a specific team or ministry.
Possible church expenses
As with income sources, be sure you account for seasonal expenses and short term expenditures (like upgrading to a new software or purchasing costly equipment). You may not make these purchases every month, but it is easier to budget for them if you break the cost up throughout the year, instead of plopping a huge expense into your budget for November.
Look ahead to some of the big purchases you may need to make over the next year, and build those potential costs into your budget as well.
Here are some of the expenses you may include:
- Facilities
- Rent or mortgage payments
- Property insurance
- Property taxes
- Storage
- Utilities
- Maintenance
- Liability insurance
- Compensation
- Salaries, wages, and stipends
- Health insurance
- Retirement contributions
- Housing allowance
- Supplies and equipment
- Ministries
- Missions
- Benevolence
- Miscellaneous
Calculate what percentage of your expenses are coming from which areas. You can, then, explore if there are places where you need to make adjustments.
Reallocating your resources
Part of creating a budget is looking at what you need each month to cover your current expenses. But it is also aspirational . This is where your church decides the degree to which your expenses line up with your priorities. Does the status quo fit with your mission and vision?
Where your money is going may not look like a reflection of where your church’s priorities truly lay. In that case, you and your staff need to ask, “What—if anything—can we change about this? How do we get from where we are to where we want to be? What would it take to change ___?”
You can only explore those questions once you have your total income and expenses sitting in front of you. This is where it will be extremely important to have all of the decision-makers in the room together. Anyone who is directly affected by your budgeting decisions should help you distinguish between needs and wants within their area, so you can talk through which expenses need to stay the same, and which you may be able to reduce.
Church budget template
Every church is different, but again, it can be helpful to have a benchmark for how much other churches allocate toward various expenses.
Below, we have included a template you can use to help create your budget. We have broken it down by overarching categories as we discussed above, but your budget will flesh these out with the subcategories that apply to your church.
This template is based on the average growing church.
- Compensation: 40-60%
- Facilities: 35-50%
- Ministries: 5-15%
- Equipment and supplies: 5-10%
- Missions: 5-10%
Depending on your church’s size, age, assets, and priorities, these percentages may look different. If your current expenses fall outside of these guidelines, consider what changes are within your control.
For example, if too much of your budget is going toward your facility, and there are other facilities in your community that could work, what would it look like to make a transition? Are there things you could do with that extra room in your budget that would allow you to grow more, or apply more of your resources toward fulfilling your mission and vision?
Once you have established the total amount you want to allocate toward each expense for the year, divide it by 12 to get your budget. If you already know that there are particular months where your expenses will look different, then adjust those amounts as needed.
And just like that, you are done! For now, this is your church’s budget.
When should you reevaluate your budget?
You should always track how your actual expenses line up with your budget, especially in the months following your new budget. It will be extremely important to carefully monitor what is going out. If you are not able to stay within your budget, you will need to reexamine your expenses and your goals and decide if you need to change your budget and make some cuts .
Pay attention to major, unexpected expense, because that is going to impact your budget as well. Hopefully, you have built up enough of a financial cushion that this does not impact your ability to do ministry, Regardless of when it happens, you will want to stop and consider which other expenses may need to shift to compensate.
If your budget is working well for you, it is still wise to reevaluate it periodically. If you made any cuts to stay within the budget, how have those cuts impacted you? Are there new ministries you would like to start? New hires to make? Have you developed a new stream of income?
Any time there is a major financial change within your church (especially one you did not anticipate when you created your budget), you will need to consult your spreadsheets again.
Thankfully, this process gets easier with practice.
Want more budgeting help?
Hopefully this post has given you the confidence you need to get started. But if you want more guidance throughout the process, we have also created a free resource to help you confidently create a church budget.
The CDF Capital Church Budgeting Handbook will help you decide how to:
- Allocate your budget
- Share it with your congregation
- Increase giving to continue growth
- Resolve budgeting disagreements
- And more
