“And my God will meet all your needs
according to His glorious riches in Christ Jesus.”
Philippians 4:19
Determining how best to use the finances that God provides to your church or ministry will be a vital component of your success. In order to effectively distribute your financial resources and cover your most important expenses and priorities, it is critical that you create a budget for your ministry. The budget will be the tool that you use to not only determine how to allocate the money you receive to various programs, projects or ministry activities, but it also helps you to understand the relationship between your goals and your use of funds to support those goals. It makes little sense to set ministry goals but then deny them the financial resources they need to prosper and grow.
The Importance of Budgets
Establishing a budget for your church or ministry is essential regardless of the amount of your revenues. A budget is a financial tool for ministry leaders to assess their anticipated revenues and prioritize their expenses so they can manage them effectively in order to maximize the benefit that can be produced from them. Failure to have a budget will often result in misallocated, wasted or non-productive resources. Given that virtually all churches and ministries have limited resources, it would be very poor stewardship of God’s resources to waste them (Parable of the Talents – Matthew 25:14-30).
There are several reasons why a budget is essential. First, it acknowledges God as the Provider (James 1:17). God gives us His resources to use and using them for His purposes will give glory to God! He also promises to give us everything we need (Philippians 4:19). Second, it acknowledges our responsibility as stewards of His resources. We are to use His resources wisely and to provide a return for Him. Third, a budget helps us understand our financial condition. We can evaluate our past, assess our current financial status, and make projections into the future. Fourth, it helps us to establish priorities and goals. This ensures that our resources will be used for the most important things. Fifth, a budget can prevent financial problems by helping us spot potential shortfalls in income and to keep expenses in line with revenues. Finally, a budget communicates our ministry goals and enables us to see how effectively we are using our resources to accomplish them.
Principles of Budgeting
Here are a few basic principles of budgeting:
- Live within your means. Learn to work with what you receive and to not spend money you don’t have.
- Realistically assess your income sources. Determine the income you normally expect to receive and consider other factors that might affect income, such as the loss of key givers or the impact of local economic changes.
- Encourage “regular” giving (1 Corinthians 16:2). Preach on the principle of tithing and teach the spiritual discipline of first fruits giving (Exodus 23:19).
- Monitor and control expenses. Delay large purchases when necessary and watch out for the cumulative effect of small purchases.
- Avoid debt. Debt can get a stranglehold on your finances and prevent you from meeting current needs. Debt also puts you into slavery (“…the borrower is servant to the lender.” – Proverbs 22:7)
- Trust God. Ask God for financial wisdom and answers and trust Him to provide for your needs.
How to Establish a Budget
The process of budgeting is pretty straight forward. Here are the basic steps:
#1. Determine how much revenue you anticipate receiving in the budget year. Generally most churches and ministries rely on past donation history to guide them in making that determination. While the past is not always an accurate predictor of the future, it is a good starting point. Analyze your income potential and review current giving levels. Determine if it will fall, stay the same, or grow. Also assess local economic factors and forecast new member giving or any special funds that may be given.
#2. Estimate and prioritize the expenses that you need to reach your ministry goals for the budget year. Identify your monthly recurring expenses such as rent, mortgage, utilities and wages. You will also need to identify any large expenses you anticipate, such as a new roof, new equipment or new ministry start-up costs. Finally consider other expenses for desired ministry resources, such as sound equipment or transportation.
#3. Prioritize your expenses. Determine need to have versus nice to have expense items. For example, determine if the expense is really necessary in order to do the ministry or what the impact on the ministry would be if the expense is not made. Also, consider whether the expense is needed now or can be postponed until later. Base the priority of each expense on the return expected from the expense (what it would achieve).
#4. Create a budget that matches your prioritized needs with anticipated income. List your prioritized budget needs in order of priority, assign expense amounts to each prioritized need, and then keep assigning amounts until you run out of income. You will probably have some needs that are not being met. If so, pray about it and make adjustments to the allocations as you feel directed. If you have income left over (not likely), then first review the expenses to make sure you haven’t missed something. If not, consider the remaining prioritized expenses or save the extra income for future needs or as protection against an adverse financial event.
The process of preparing a budget is not difficult and will help pastors & church leaders better understand their financial situation and enable them to more effectively deploy their limited resources to achieve the best results for God’s kingdom. The wise leader will also seek the Lord’s guidance and direction since He is the ultimate owner of all that we have and will let us know how He wants us to use them!
(taken from chapter 9 of our Management for Church Leaders™ Volume #2 Training Manual © 2010)