SEVEN WISE THINGS PASTORS SHOULD DO TO FINANCIALLY SUCCEED By Gordon Botting Stewardship Director, Pacific Union Conference Over the last six months, these financial political words, “financial cliff,” “debt ceiling,” and “sequester” have become background noise. However, other expressions—foreclosure, recession, bankruptcy, credit crunch, stock loss, depression, bank failure—are hard to ignore because they have affected many of our clergy and their congregations. And even if some report that we are well into recovery, many pastoral families are still feeling the lingering effects. If one of these financial utterances has affected you and your family, and you feel like you are drowning financially, then you may want to reexamine the seven strategies in this article to help you and yours get through this recession and come out the other side healthier in body, soul and wallet. 1. Planning is a must. Businesses talk a lot about having specific mission statements and vital strategic plans. The same is true for the pastoral family and, even more so, as your business doesn’t stay put like most commercial enterprises. Your financial plan should be clearly enunciated for not just the next month, but for the next twelve months, the next five years, and into the future. Each goal must be explicit and detailed, such as planning and saving to own a home in five years; paying for your children’s education or financing further professional education for you and your spouse; or financing scholastic overseas trips to the Holy Land or Reformation trips in Europe. Each of these goals MUST be written down and reviewed on an annual basis, usually at the beginning of a new year or after you have completed your annual taxes. Each specific fiscal goal requires a form of measurement in time or money or both, such as “We will save $300 per month for a deposit on our first home over the next five years.” The three most important aspects of a financial plan are that these goals have to be yours, they should be completed with lots of discipline and enthusiasm, and they should have some type of reward to incentivize you to reach the next financial objective. 2. Budget effectively. If your financial plans are your economic mission statement, then your household budget is one of your vital strategic goals. No family or individual can have a successful financial future without a family budget. Budgets are designed to maximize your income and minimize your expenses. Each year prepare your budget on what you actually receive in your paychecks each month. Budgets can be divided into two major categories — future and current expenditures. Future disbursements include insurance outlays (vehicle, medical, term life, disability, etc.); savings accounts (emergency, short term, long term, etc.); and schooling (elementary, academy, college, graduate school, etc.). Current outgoings include firm payments, such as your home mortgage/rent and vehicles loans; flexible payments, such as utilities, water, sewer, telephone, and Internet; and fixed payments, such as household supplies, clothing, allowances, entertainment, and contingence. The best method to make your budget stick is to have all your major deductions automatically taken out of your bank account so you never pay late fees or penalties, and pay cash for your regular items—such as groceries, clothes, and entertainment. Cash should be taken out of the bank and placed in four envelopes. You can use only that amount for the current pay period. 3. Get out of debt and stay that way. Once you have aligned your finances, the next step is to pay down all consumer debt (credit cards, school loans, furniture charges, etc.) Making this happen in the shortest period possible will mean two things — one, increasing your income through a part-time job, and/or two, reexamining your household budget and finding areas that can be cut, reduced, or both. Here are some suggested areas where you can shrink your budget: television, Internet, insurances, eating out, entertainment, hobbies, vacations, clothes, etc. With a set amount each month for debt reduction, you will soon see the light at the end of the debtor’s tunnel. 4. Save as though your life depended on it. Because of the early 21st century housing boom, many clergy families spent as though there was no tomorrow. As a consequence their savings accounts dropped to below zero. However, piggy banks are back in vogue, and we are seeing a surge in people paying down their debts and putting money away for the most important periods of their lives, such as their children’s education and retirement. But, beyond that, are you regularly putting aside funds for short-term goals (new tires or bedroom linen), mid-term goals (a new vehicle or deposit on a home), and long-term goals (owning your own business)? 5. Reduce your vehicle expenses. One of the major items that a pastor and his/her family will finance will be vehicle purchases. This will also be your biggest liability. To reduce this overhead follow these two rules: purchase an excellent automobile that is no more than two years old and that does not have more than 20,000 miles. There are good reasons for these two rules. The greatest depreciation on vehicles occurs in the first two years (approximately $8,000), and all vehicles have a bumper-to-bumper manufacturer’s guarantee for 36,000 miles, which allows you to run this slightly used motor vehicle for another year and get the knocks out of it before the vehicle maintenance is on your dime. It has been my experience as a pastor that if you regularly maintain your automobile, it will last you for at least 250,000 miles with no major repairs. 6. Learn how to afford your earthly mansion. Part of the American dream is to own your own “castle.” Since the average pastor will move five or six times (or more!) in his/her clergy career, it is more difficult to make this a reality. However, currently two things are in favor of the young minister who has just started serving his/her first congregation. For economic reasons conference administrators are reluctant to move younger clergy as they have in the past, and the housing market is the lowest it has been in the last decade. Recently, I encouraged a young pastor living in a suburb near a large city. Three years ago a new average home in the area was selling for approximately $350,000, and now such homes are retailing for $150,000. Rent for this three-bedroom, two-bath residence (with a two-car garage) in the same district is currently just under $2,000 per month. If the family purchased one of these new homes with a fifteen-year mortgage, it would cost them approximately $1,200 per month, but if they made up the difference of what it would cost them in rent, they could be homeowners in less than eight years (about the time they would be moving to their next district). Even if they moved earlier, they would still have a sizeable deposit for their next home. To get a great start at any age, while you are still renting or living at home, begin a special savings account for this purpose. On your first home, aim to put down at least 20 percent of the value of the house you are planning to purchase. Once you have acquired your home, make it a goal to reduce the mortgage as quickly as possible. Taking out a 15-year mortgage is only approximately a third more than what you would be paying on a 30-year mortgage, but its reward will be tens of thousands of dollars saved in interest and home ownership years ahead of other homebuyers. 7. Plan for your future. I remember my first camp meeting pitch (for younger ministers: that was one week of putting up tents) over forty years ago. It was then that I was first confronted with the significance and the consequences of retirement. A senior pastor who was retiring after the camp meeting verbalized his frustration that he had not planned well for this important phase of his life, partly because he believed that Jesus would come before he retired. All he and his wife had was their sustentation, Social Security, and one small vehicle. No house and no other funds had been set aside for this essential chapter of their lives. Although retirement seems a long way off, it will come sooner than you expect. Hence the need, to immediately start matching the conference’s defined contribution, plus adding few extra dollars each pay period will in the long haul really pay off. If you and your spouse can over the first five-ten years of marriage when you do not have children make saving a priority, you and yours will reap the most benefits through the magic of compounding principle and interest. For those who are 15-20 years away from this period in your life, I encourage you to firstly add additional money to your house mortgage. My wife and I made it a rule that we would not retire until our house mortgage had also been retired. Secondly, after your children have left home and you have no more college expenses, use that money to build a nest egg, particularly a Roth account, which will cost you taxes now but not so in the future when you have a much smaller income. For those who are within five years of retirement, begin putting together a budget based on your Social Security, 403b, and maybe sustentation. On the average, your retirement income will be based on 40 percent from Social Security, 40 percent from your 403b and/or sustention, and 20 percent from other income such as part-time employment, revenue from a second home, a Roth account, or annuity funds. Like millions of Americans, you may feel anxious, stressed out or at best concerned about the troubling uncertainties that face us as pastoral families and individuals in these unsure and uncertain times. As one pastoral family to another, let me assure you that if you follow these money management principles, and trust in the sure promises of God, you will find your bearings in this current economic situation.
Posted on: Thu, 27 Jun 2013 12:00:00 +0000