Imagine that the financial team has been working for months on creating the church budget for the upcoming fiscal year. They invested the time to develop realistic projections of annual donations, worked with ministry leaders to ensure their budget supports the mission, vision, and values. Not to mention the planning and detail to cover compensation, office, and facilities costs. The team even planned for future replacements and repairs with sinking funds. Feeling confident in their budget, the financial team presents the budget to the church like Moses bringing down the ten commandments. That’s when the questions roll in like a tsunami. “We’re only spending that much on outreach?” “It couldn’t possibly cost that much for utilities?” “Seriously, 45% of the budget goes to compensation?” By the way, these are all great questions from well-meaning people, that were not a part of the process and want to make sure the church is managing God’s money wisely. That’s why it is helpful to have a baseline showing what healthy percentages look like in a church budget. Use the following church budget percentages as a guide, not as commandments.
- Compensation (45% – 55%) – Compensation costs include salaries and benefits like medical, dental, vision, life insurance, and retirement. The rising costs of these benefits and factoring in a cost of living or merit increase can quickly change the percentage of compensation for stagnant or shrinking churches. Because compensation is typically the most expensive line item of a church budget, it gets the most scrutiny. The experts at Vanderbloemen not only agree with this range for compensation, but they developed a method to determine if your church is safely within the range. A church that is not in a period of growth, and finds itself on the high side of the healthy compensation range, may need to take appropriate action to remain financially viable. One helpful tool is to measure the number of full-time staff per person in the congregation. As a general rule, there should be about a 1:76 ratio. There are no easy solutions to solving the issue of compensation expenses that exceed the amount that the church can endure. Eliminating staff is not always the right or best solution. Before taking that route, consider other options, like having an honesty talk with the congregation or reducing pay or benefits for multiple staff members.
- Building (20% – 40%) – Building includes costs like mortgage, maintenance, custodial, insurance, etc. Of all these costs associated with the building, the mortgage is the big-ticket item here. Churches on the low end of the percentage range carrying a mortgage should consider adding payments to the principle to eliminate their debt. However, churches saddled with a large mortgage and find themselves on the high side of the budget range may need to find creative ways to lower costs without jeopardizing safety measures or permitting the facility to fall into a state of disrepair.
- Ministry – including outreach (20% – 35%) – The ministry budget includes costs to outreach, missionary support, service expenses, care, children’s, young adults, and adult ministries. It’s not uncommon for churches that have been around for a long time to find ministry costs rise each year. Evaluating how each ministry accomplishes the mission is an essential part of building a healthy budget each year. It’s unlikely many churches still need a ministry to mass-produce cassette tapes anymore.
Every church is in a different phase; some are in a season of growth, others are shrinking, and others are at a plateau that could start trending either way. These percentages are guidelines, not absolutes. Churches need to understand their position and direction to determine the health of their church and take the next best step in building a budget that funds the mission.