At this point, it does not matter if you are running a small business, giant organization, personal finances, or a church; it is impossible to ignore that costs keep going up. And not just the cost of non-essential or luxury items, essential goods like utilities, groceries, housing, clothes, and transportation are all on the rise. What we are all experiencing is known as inflation. According to USAFacts.org, “Inflation is an overall increase in the prices of goods or services in an economy.” Inflation is a thief stealing the purchasing power of hard-earned money. The higher the inflation rate, the lower the purchasing power. Here is just one example we can all relate to; a gallon of milk that cost $3.74 in 2021 now costs $4.21. That is an increase of 11.2%. According to the US Bureau of Labor Statistics, the annual inflation rate (March 2021-March 2022) is 8.5%, the highest since December 1981. As individuals and families struggle to keep up with the rising cost of goods and services, they face difficult decisions on where to cut back. Sadly, for some, it will be in their charitable giving. This post is not a judgment of those making tough decisions in difficult times; the desire is to help churches deal with the reality they face. The impact of inflation on a church budget is multi-fold, and survival means navigating decreased giving and increased costs. Here are three tips to help churches budget during times of inflation.
3 Tips to Help Church Budgeting During Inflation
Evaluate the impact of inflation on giving. When it is time to create a church budget target, determining an accurate estimate of the donations is crucial. The best way to do this is to use at least two years of data. Start by calculating the average adult attendance per month and compare that to the same month of the prior year and determine the direction attendance is heading. Next, do the same analysis for donations. Compare attendance trends to donation trends. If the attendance trend is flat or up and giving is down, this is a good indicator that inflation may be impacting the congregation’s ability to donate at the rate they were prior. Another way to identify the impact of inflation on giving is to run a donor analysis to compare annual donations by giving units. Most Church Management Systems (ChMS) provide this type of report without names attached. It’s the best way to get the data needed for analysis without being intrusive or insensitive. Identifying the impact of inflation on giving helps to craft an accurate budget target.
Evaluate the impact of inflation on expenses. Per the Bureau of Labor Statics, even though overall inflation is at 8.5%, energy services are much higher at 13.5% – electricity at 11.1% and natural gas at 21.6%. When building the church budget during inflationary times, consider the increases in operational costs such as utilities, custodial supplies, and repair and maintenance costs. Likewise, ministry teams must discover the financial impact on line items such as curriculum and camps. And, do not neglect the effect of inflation on staff. Wage stagnation is all too real in many churches. Since overall inflation is 8.5%, stagnating wages are essentially a pay cut.
Budget Accordingly. Armed with the data to understand the way inflation impacts the way people support the church financially, churches must adjust the target to match the donations. But, adjusting the income (giving) side of the ledger is not enough; churches must evaluate expenses through the lens of inflation too. In Luke 14:28, Jesus gave an illustration regarding the cost of discipleship, but the example can easily apply to budgeting. Jesus said, “Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it?“
Inflation is impacting all of us by robbing us of our purchasing power. Churches building their budget during inflationary times need to be particularly mindful of the financial impact on their congregation and how that can relate to their ability to donate and the impact on expenses. But, by budgeting accordingly, your church can complete its mission.