Our church sets aside time in the service each Sunday to talk about giving. It’s more than information on how to give; it’s a space to worship God with our tithes and offerings. It provides a pastoral moment to share why we give. A few weeks ago, I thought King David’s prayer in 1 Chronicles 29 gave a perfect example of understanding ownership vs. stewardship. David wrote, 13 Now therefore, our God, we thank You, and praise Your glorious name. 14 “But who am I and who are my people that we should be able to offer as generously as this? For all things come from You, and from Your hand we have given to You.“
David understood that it all belongs to God. We have nothing to offer God that isn’t already his. Managing, or as Christians like to say, “stewarding” the resources God entrusts to us is a big deal. Maybe that’s why a church budget is so important. It’s a way to show how every dollar goes toward accomplishing the church’s mission and vision. It demonstrates transparency and accountability. It models generosity.
For those new to the church budgeting process, knowing what type of budget to use (line item, incremental, or zero-based) or what categories are necessary can be confusing. Listed below are some basic categories that make up a church budget. It’s a great starting point, so try not to get too hung up if these don’t match your church perfectly. It’s okay to adjust; it’s your church’s budget.
Income
Donations are the primary source of income for churches. In order to build a budget that allocates every dollar to accomplish the mission, it’s imperative the church learn how to project its income based on attendance, giving, and trends for the upcoming fiscal year. It’s backward thinking for a church to project an income needed to match its spending.
Expenses
An effective budget lists all the church’s expenses and ties them to the mission, vision, and goals for the upcoming fiscal year. The sum of all expenses must match the projected income. The following is a list of common church expenses:
- Compensation – includes salaries (exempt, non-exempt, housing, etc.), taxes (federal, state, FICA, etc.), and benefits (medical, dental, disability, retirement, etc.). Since compensation often consumes a majority of the operating budget, churches must take great care and show detail when developing this portion of the church budget.
- Facilities – includes various line items like mechanical (HVAC), custodial and janitorial supplies, landscape, repairs, and maintenance costs. Facilities budget can vary based on whether or not the church owns or rents a facility.
- Operations – includes administrative, IT, finance, utilities, office, supplies, etc. Since operational budgets typically remain static from year to year, projecting expenses is easier using prior years’ data.
- Ministry – includes children, students, groups, adult classes, men’s, women’s, and even weekend experiences like hospitality, worship, and service planning and promotions. These expenses can vary from year to year based on the goals and initiatives. Planning for the upcoming fiscal year requires time, research, and using prior years’ data to avoid neglecting recurring budget items.
- Outreach – includes local and global initiatives and includes missionary support. Churches typically separate outreach from ministry to highlight their evangelistic efforts.
- Emergency Funds – typically have between 40 and 80 days worth of expenses saved for an emergency. Churches with a fully-funded emergency fund do not need a line item for this category. Churches without an emergency fund should prioritize building one as soon as possible.
- Sinking Funds – build the capital needed to fund costly items before the church needs to replace them. Sinking funds are for items like a roof, HVAC system, sound system, flooring, etc.
The list of expenses shown above is not exhaustive; it’s a sample to get churches started. Each church has different needs and levels of detail for budgeting and reporting. After completing the budget, it may help to compare your church’s budget percentages to that of a healthy church. Church budget percentage comparison may uncover areas where the church is over or under-spending, limiting the church’s effectiveness. The key is to build a budget that funds your church’s mission with the financial resources God provides.
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