I'm not an economist and don't have any interest in predicting what will be happening in the next six minutes, let alone the next 6 - 12 months. But just because we don't know doesn't mean that we shouldn't be thinking strategically to ensure we lead our churches, our staff, and our communities well, regardless of the economy we may find ourselves in. Since our expertise focuses on the financial side of leading, I thought I'd give you three things I suggest doing as people begin talking about a recession.
There are very few things that are more stressful to an Executive Pastor that falling behind on your budget. It's how we can ensure bills are paid, staff are compensated, and our vision is adequately funded. If there's uncertainty in the ability to make that happen, it can really impact you as a leader and will have a trickle down effect to your staff. So how do we fix it? Don't create a budget that you can't hit if the economy makes a shift.
Let's look at some examples:
Growing - If you've experienced a 5% gain in your giving year-over-year and you're staring down the potential of a recession, a conservation forecasting approach could be that you budget flat from the previous year. That means you don't include plan for a gain but budget exactly what you brought in this year. In this scenario, I also suggest adding priorities B,C, and D (Priority A is your initial budget) in the event you do exceed your forecasted income.
Declining - If your church is experiencing a decline, say a 5% decline year-over-year for the past 3 years, this would be a good time to be fiscally conservative and consider budgeting a decrease in annual giving of 10%. Remember, this doesn't mean that you're actually going to decline by this amount. It simply means that you have a plan in place if that actually happens. Just like a growing church, you need a list of priorities in the event you bring in more resources that forecasted.
Flat - If your church has been consistent over the past few years, including through COVID, it's likely your church will remain consistent through a downturn. At any rate, I'd suggest around a 2-3% decrease in your forecast for your budget. If your giving stays the same, just have your priorities defined so you'll know what to fund, and your budget won't really feel any different than it did the previous years.
I've been saying it for a while now that the average church is over-staffed and the average church staff person is underpaid. With those two variables, there's only one way to resolve it: pay fewer staff but pay them better. I'm not advocating for laying off staff or reducing your staff just because of a potential recession. I'm advocating for XPs to take a good look at:
One way you can help you equip your staff, members, and your community is by equipping them in how to manage their finances, including in an economic downturn. What I don't mean is to try to put everyone in some Dave Ramsey class. I'm suggesting really tangible teaching/training from some experts in their field from your area on things that can directly impact peoples' ability to weather storms of uncertainty. It absolutely a great place to minister to them in their time of need but it shows the church cares about their physical well-being.
Staff: I always recommend starting with the staff because they are usually vehicles that help execute the vision of the church. The last thing you want is to have staff without expertise or access to expertise in the area of finance, taxes, investing, or healthcare but then try to help your community in this area. Equip your equippers. Bring in a CPA to meet with them collectively and individually. Are they setup to understand and participate in the advantages of pastoral housing, writing off church-related expense personally, or adjusting their deductions on their W4 to ensure they take home the maximum each pay period without risking having to pay-in at tax time?
Members & Community: The knowledge can run the gamut when it comes to finances and our communities. We always suggest start with basic budgeting and continue from there. Don't be afraid to bring in more experts like a CPAs and investment specialists to help coach on tax practices and more advanced strategies. Oftentimes, the high-earners in our congregations are left out when it comes to equipping because we assume they have the knowledge because they have the financial means to access those resources and that's not always the case. Maybe your high-earners don't know the tax benefits to giving through investments which can give most households more disposable income from their day-to-day earnings.
If you'd like to talk through implementation of any of these ideas, reach out! Fill out our quick 7-question form to give me a bit of background and let's jump on a call.