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7 SIMPLE STEPS TO A HEALTHY & EFFECTIVE CHURCH BUDGET

Why Every Church Needs a Budget

Your church budget isn’t really about money. Of course, a church budget describes how a church will spend money during the year. You’ll see dollar signs throughout it. It likely has some relation to what’s in the church’s bank account.

But in reality, a church budget is just your church’s vision with dollar signs in front of it. Your budget is a visual representation of how God will work in your community through your church over the next 12 months.

Your church budget is an act of ministry. It’s easy to downplay the financial health of your church, but God uses the generosity of his people to help your church do his work.

We’ll cover the following information on this page. Feel free to read straight through or skip directly to the sections that interest you:

The Potential of an On-Budget Church

Imagine for a moment what could happen in a church with a consistent, predictable budget, built not on the whims of your church staff or your lay leadership but on the unique vision God has given your church to reach your community.

Imagine less strife as your church decides at the beginning of the year how you’ll spend your resources and sticks to it throughout the year.

Imagine being prepared for the unpredictable yet transformative opportunities God lays before your congregation this year.

It’s possible. Are you ready?

If you don’t plan how you’ll use your resources to fulfill your vision, you’ll spend your resources on everything but your vision. If you don’t plan your spending, your spending will plan you.

What Are the Benefits of Consistent Budgeting?

Less Stress
Less Conflict
More Flexibility

Less Stress

Money problems cause stress in marriages, businesses—and churches. Without an effective budget, your church will always wonder if you’ll have enough money for the ministry you want to do. One of the most important reasons families and churches budget is to be able to spend money to fulfill important goals without worrying whether accounts will be drained when they do so.

Your church has regular bills that come every month—electricity, rent or a mortgage, and staff salaries. Those bills will come next month whether or not you overspend this month. A budget helps you be ready for those bills.

Less Conflict

Part of the reason your church will have less stress with a budget is because you’ll turn down the temperature of conflict in your church. Money problems cause fights. When spending isn’t planned, people fight over who will get to spend your resources.

The genius of budgeting is that the church agrees, before the year ever starts, how they’ll use their resources. Instead of fighting every time a dollar is spent, churches that budget can hash out the spending ahead of time.

This is particularly important for pastors. Pastors often face the brunt of spending criticism—particularly in smaller churches where they are no other staff. A budget protects pastors by giving them the freedom to use agreed upon resources to achieve common goals.

More Flexibility

Sometimes people mistakenly believe that budgets stifle a church’s responsiveness to the Spirit. This false belief couldn’t be further from the truth. First, don’t worry. Your budget simply can’t get in the way of God’s Spirit. It isn’t that powerful.

The truth is exactly opposite. A budget gives you the flexibility you need to be more responsive to what God wants to do in your community. When you have a budget, you’re less likely to overspend and more likely to have the money available to seize new opportunities.
A checkbook is a theological document; it will tell
you who and what you worship.
—Billy Graham

Frequently Asked Questions about Church Budgeting

  • How much debt is too much for a church?

    While church debt isn’t a sin and may be an important part of building enough facility capacity for growth, too much debt can make it tough to develop any momentum. The biblical teaching that “the borrower is slave to the lender” (Prov 22:7 NIV) isn’t just good wisdom for individuals but for churches as well.

    It’s wise to be prudent about how much debt your church accumulates.

    How much debt is too much is highly dependent upon your church’s situation. To begin to answer that question, ask yourself:
    • What are your church’s giving trends? If giving is in decline, be cautious about adding new growth. While expanding your facilities may lead to new growth, saddling your church with oppressive debt can freeze your growth even in a new building. Many lenders like to see growth in giving (and attendance) for three consecutive years before moving forward with a loan.
    • Will the debt be a strategic piece of your vision? Don’t take on debt to do something that’s just helpful for your church but won’t move you closer to the goals your church has set together.

    In general, avoid debt that is more than three times your church’s annual giving, and keep your church’s debt service to no more than a quarter of your monthly offering.

  • Who should see your church budget?

    Generally, your church polity, as laid out in your bylaws, will set a procedure for how you engage your congregation regarding your budget. Some churches provide a detailed budget to the entire congregation for approval. Other churches go to a specific committee of laypeople for approval. Still others make most of their budgetary decisions as a staff. Many churches are somewhere in between those options. You may or may not have much control over those decisions.

    Be as transparent as possible with your church family and your broader community. Trust is an important component of a church’s health. Your church’s participation in your mission through service, giving, and praying largely depends on how much they’ve bought into your vision. The more transparent you are about your finances, the more trust your congregation will have for your efforts to pursue your collective mission.

    If possible, let laypeople have a say in creating the budget, and get as many eyes as possible on the final product.

  • How much of our budget should be staff-related?

    Most people familiar with church staffing suggest that the average church spends about 50% of its budget on personnel costs. A 2010 report by Fact2008 said 1 in 7 churches spend less than 35% on staff. They also noted that churches that spend less on staff spend more money outside their church walls on ministry in the community. According to the report, these “lean staff” churches have one paid staff member per 86 attendees, while those who spend more on staffing have one staff member per 70 attendees.

    You’ll need to make your determination about how much you want to spend on staff. You’ll want to take into consideration how effective your church is in mobilizing volunteers. You’ll need an idea of what your church body—and the church leadership—expects of its staff.

    If you have to choose between hiring more staff and paying the staff you have a reasonable, professional rate, choose the latter. The Bible is clear that pastors should be paid a living wage (see 1 Cor 9:9–14). If you can’t budget enough to pay your church staff a healthy wage, you likely have too large of a staff.

  • When should we start our fiscal year?

    Most churches either start their fiscal year in January or in the fall (usually September 1 or October 1). If you’re trying to decide when your church should begin its fiscal year, consider the following:

    When are your natural highs and lows for giving? You may not want the end of your fiscal year to correspond with your highest giving time. If you come up short during an expected high, you won’t have time afterward to rebound.

    Does your church operate a school? Schools tend to start in the fall and end in the spring. It may make sense for your church to mirror that schedule.

    Does your church have the flexible accounting tools to help you deal with a church year that differs from your tax year? Your church can’t change when your tax year starts and ends. If you choose a different fiscal year, you’ll need to make adjustments when you file any required tax documents (like staff salaries and giving statements). That’s not necessarily a problem, but be aware of it before moving your church budget away from the calendar year.

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Church Budget Categories

One of the most important decisions your church makes when you prepare a predictable budget is what categories you’ll track. Your categories should say something about your priorities. If you’re budgeting for what matters most to your church, people will see it when they look at your church budget.

That’s why Rick Warren recommends churches that adopt his purpose-driven philosophy of ministry budget for their church’s purposes. In The Purpose Driven Church, Warren writes: “We categorize every line item in our church budget by the purpose of the church that it supports or to which it relates. The quickest way to discover a church’s priorities is to look at its budget and calendar. The way we spend our time and the way we spend our money show what is really important to us, regardless of what we claim to believe.”

Your budget categories are more than a spreadsheet. They are a window into what your church considers important.

Regardless of your church’s specific priorities and the corresponding categories, those categories will fit into two broad areas (just like personal budgets): income and expenditures.

Income

Your church’s income represents the limiting factor of your church budget. You can’t spend what you don’t have (or at least you shouldn’t on a regular basis). While your church may be able to secure a loan for capital expenses, you likely won’t be able to do so for ministry-related costs. You should never feel like your income limits what God can do through your church, but you still need to consider it.

Most churches have three sources of income. First, they have tithes. Based upon the biblical teaching of giving 10% of income back to God, tithing represents the giving that goes to the general needs of the church—it’s the lifeblood of the church budget. Not every church teaches tithing, but regardless, most have a weekly offering that pays predictable church expenses like staff, ministry, and facilities.

Churches also bring in offerings for specific (and often irregular) expenses. That could include capital expenses, special missions offerings, and benevolence gifts. Because these come above and beyond a member’s regular giving, they’re hard to predict. For this reason, they are less likely to be included in a typical budget (although you should budget for expenses you incur when trying to promote these offerings).

You’ll also have donations that come in from outside your church body. Some churches bring in a sizable amount of outside donations. Most of these outside donations will go to specific causes and ministries of the church. You’ll want to be somewhat careful basing budgeting decisions on these donations, but if you’ve had a history of consistent outside giving to a specific ministry, feel free to add it into the budget.

Expenditures

Your expenditures represent the money your church is spending every year. Most church expenses fall into four broad categories: evangelism/missions, personnel, ministries, and facilities. Your church’s specific ministry strategy may impact the names and even the number of expenditure categories you track, but be very careful about including too many budget categories. This can make the budget more confusing for laypeople who want to understand the church’s spending and even staff trying to manage the budget.

Your church’s budget for evangelism and missions will include everything you spend to reach people outside your church. Some churches will fold evangelism into their ministries budget and then include funding for missions outside their own local community in a separate budget item. The missions/evangelism budget would include giving to missions organizations, denominational ministries, and individual missions. If local evangelism is included, local ministry projects and evangelism training would be a part of it. You could even include marketing and advertising costs in this category.

Your personnel budget will almost certainly be the largest part of your church budget. For some churches, particularly smaller ones, staff costs will be 60% or more of your budget. Personnel costs don’t just include salaries but also any benefits and housing allowances you include in your compensation packages. It also may include Christmas bonuses or special gifts during pastor appreciation month.

Your ministry budget will likely be particularly broad. It’ll include subcategories like Christian education, small group ministries, discipleship, benevolence, and any kind of ministry your church operates for your church family. Ministries that predominantly serve the community may come out of this category or be a part of your evangelism/missions budget.

You’ll be tempted to have a fluctuating facilities budget depending upon where your church meets, your debt situation, and whether you own your building. The more consistent you can keep this budget item, the better. The category will also include any upkeep you have on your property. Typically, during the times you’re spending less money on rent/mortgage payments, you’ll have greater upkeep needs.

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Creating Your Church Budget

Look at past budgets

Your first step in creating a church budget is to take a look at past church budgets. Start with your last budget, but review the last three before getting started with your next one. Most importantly, look at the places in your budget where you’ve consistently overspent. Make sure you budget adequately in those spots. Conversely, look at where you’ve underspent. Those are the categories you can move money out of to compensate for where you’re overspending.

Take a long look at your personnel budgets in recent years and make sure you’re properly providing cost-of-living adjustments for your staff. Try to at least budget for a 3% raise per employee. If you can do more, be generous.

Set and track goals

Goals help to give your church a sense of momentum. If your church is constantly setting and reaching goals, it’s hard to get stale. In fact, if you find that your church is struggling financially, one reason may be that you’ve failed to set ambitious goals—for attendance growth, ministry impact, etc.

Another area where it’s important to set strong goals is in your giving. Many churches already do this for capital campaigns. Because capital campaigns work toward a tangible goal that everyone knows, goals help to build excitement. They have the same potential in your church’s annual giving. This can be particularly helpful as you work toward an end-of-year giving goal.

Unless you have a plan to track your goals, it won’t matter which ones you’ve set. Goals that aren’t tracked won’t be met. Develop regular habits for checking in on giving goals. Set your reminders on your preferred calendar applications to look at giving totals for the week. Your church’s giving software, like Faithlife Giving, should be able to help with this.

Stabilize your income

Budgeting requires a predictable income. If you can’t expect a specific income, you won’t know how much you can budget for specific expenses. Yet it’s understandably hard for churches that rely on donations to predict giving patterns. Giving has traditionally been tied to attendance. When attendance drops (in the summer or during bad weather), giving drops with it. Unfortunately, regular bills like utilities and salaries don’t drop with these seasonal patterns.

That’s why it’s so important to guard against these cyclical giving changes by leaning on technology and recurring giving.

“Technology, like mobile giving, ensures people can give when and where they feel led,” Jess Holland writes in this free guide, 5 Proven Steps to a Predictable Church Budget. “Recurring giving alleviates the friction of having to remember to bring a check or cash to church. Best of all, with great giving technology, you can return your focus to the mission of your church—and enjoy margin to start something new, like a community outreach program, foster care, or small groups ministry.”

Recurring giving works like automatic bill pay for your mortgage or utilities. Your givers establish a set amount they want to give to your ministry each month and authorize you to take it out of their bank account. You’ll automatically receive these gifts monthly (or weekly if that’s how the giver wants to set it up) until you turn them off. This leads to consistent income and a predictable budget.

Cut unnecessary expenses

Every church has expenses they simply don’t need. It can be hard to spot them though. The most effective way to make these cuts is to be crystal clear on your church’s mission and your ministry plan. The more clear you are on what you’re doing, the more you’ll be able to see what you’re doing that’s unnecessary.

Sit down with your budget and go line by line, asking yourself these important questions. (These questions won’t apply for every line, so use the ones that do.)

  • Does this expense help our church fulfill our mission?
  • Are we effective in the way we’re spending these resources?
  • Is there a different, less-expensive service provider we can use?
  • Are we paying for an item or a service we’re not using?


Cutting unnecessary expenses can be painful, yet it’s critical for developing a healthy budget.

Keep an emergency fund

One of the biggest roadblocks to a healthy, predictable budget is emergencies that surprise you. When the COVID-19 crisis hit in the spring of 2020, churches that didn’t have an emergency fund were left wondering how they’d make up for the giving loss that came when in-person meetings had to be canceled temporarily. Many churches had to cut important ministries and lay off staff. An emergency budget could have mitigated those problems.

Aim to build an emergency fund of three to six months of expenses. You won’t get there all at once. Start small and grow the emergency fund over time. Consider putting the money in an interest-bearing account that you can easily draw from in case you need it.

Ensure transparency

All nonprofits (but particularly churches) rely on trust. If your community doesn’t trust you, your opportunities for ministry will be extremely limited. You need your community to trust how you use money.

Your budget process provides an important way to develop trust in your financial stewardship. If possible, let your congregation into the budget-making process as early as possible, so they aren’t just approving a budget the church staff creates. Let them be a part in the development of the budget.

Once you finalize your budget, be transparent with your congregation about the process you took to get there. Depending upon the size of your budget, you may want to show a simplified version to the congregation as a whole, but make sure you show enough detail so that your priorities are clear. Your donors—those sitting in your pews—deserve to see where their funds are going.

Incorporate prayer

As mentioned earlier, your church budget isn’t primarily a fiscal document. It’s a theological one. It’s a crystal-clear demonstration of your church’s commitments to theological goals. If God gave you these goals, he will help you accomplish them.

It’s critical that you ask God to be a part of all of your budget decisions—from the beginning as you get input from various teams and committees to building the budget to finalizing it and getting feedback from your congregation.

Here are a few items to pray about along the way.
  • Ask God to make your church trustworthy stewards of the resources you’ve been given.
  • Pray that your budget would reflect God’s priorities for your church and the vision he has given you.
  • Surrender your resources to the Lord, asking him to multiply them for his kingdom purposes.

Your Next Steps for a Great Church Budget

Building a predictable church budget shouldn’t be scary. Following the steps above will help you create a budget that serves as a tool for reaching the vision God has given your church.

Find your team

It’s time to dig in. Ask God to clarify who should be on your church’s budget team. Look beyond your church’s normal budget team. Look beyond your church’s staff and traditional leadership structure.

You likely have people in your church experienced with a budgeting process at least as complex as the one your church has. Invite small business owners, marketing leaders, and CEOs into the mix. You’ll be amazed at the insights you get.

Most importantly though, invite God into the process. Don’t just make your budget another exercise you need to get through every year. Ask the Lord to make it a step of faith for your congregation.

You won’t be sorry.

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CHURCH BUDGET

5 Proven Steps to a Predictable Church Budget

Discover how to develop a budget that you can count on.