Planning the annual church budget

By Rev. Dr. Perry Hopper & Rev. Dr. Sara Day

The annual budget planning process can bring feelings of unease and concern
for pastors and church leaders.

The reality is that it costs money to do ministry effectively, and a carefully thought-out budget demonstrates a commitment to the missional goals of the church.

We know that God will provide; but even though we trust that God will bless the work we do to serve him, we still need to have a plan — financially.


A budget is simply a financial plan for a period of time. It consists of expected income such as tithes, offerings, rent from facility use, and bequests and gifts, as well as other sources by which the church realizes income. Planned expenditures including mortgage payments, salaries, employee benefits and expenses, office expenses, charitable giving and buildings and grounds maintenance. Sunday School and other education program expenses also need to be factored in.

A budget is built upon certain assumptions. Those assumptions might not always prove to be true, so your budget needs to be flexible, not rigid. This will account for changes that might occur during the fiscal year, such as receiving more gifts than expected, or having to make unexpected repairs to your building.

Remember: it’s a plan, not the law.

How to build a good budget

There are basically three approaches used to build a budget.1 Deciding which one is the right one for your church depends on your church’s individual needs. The

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first approach, Incremental Budgeting — also known as line item or traditional budgeting — is a popular budgeting process among churches. Incremental budgeting takes the current year’s budget as a basis for the next year’s budget and adjusts each item for anticipated cost increases / decreases or activity changes. While this approach might be expedient, it is not as thorough or as accurate as other budgeting approaches.

The second approach is Zero-Based Budgeting, a process in which each line item is built from the ground up, starting with zero rather than the prior year’s budget. This is a very challenging and time-consuming process. However, it is useful for organizations, such as churches, whose programs and methods of operation carry forth year after year without change. Experts suggest zero-based budgeting as a useful approach about every five years to provide a fresh look at all programs and activities.

The third approach, Program Budgeting, evaluates all programs and activities based upon their effectiveness at their current levels of funding and on their potential. The church identifies each program or activity, the needs each program serves, and the past effectiveness of meeting those needs. The second step in this approach is to establish a target budget for the upcoming year. This could be based on funding, pledges received, past levels of giving and projected growth, assessed needs or a combination of these criteria.

Once you have decided upon the budgeting approach your church will take, you will need to set goals and define objectives that will allow you to accomplish your mission. A well-thought-out budget allows your church to be effective in achieving its annual goals. Creating the budget is an important step in being a good steward of the resources God provides, so that the work we do serves God and helps people in ways that make a difference in our communities and the world.

Get staff involved

Staff members who take some type of ownership for the budget are more likely to respect it throughout the year. Most congregations have a committee on finance and stewardship. The committee can consist of the pastor, the church treasurer, and the board of trustees.

The committee might conduct a study of the current year’s financial performance, collect proposed program estimates from various departments within the church, and propose a budget.

Once the budget is approved, it must be administered throughout the year. This is accomplished through monthly comparisons of how much money is coming in and going out. Completing this exercise will allow you to identify which line items in your budget are deviating from the plan and act to eliminate the variances. Programs might need to be trimmed, or purchasing equipment should be delayed, in order to keep the budget balanced. Regularly reviewing the budget will keep the pastor informed on what has been spent and what is remaining.

All of this may sound like a lot of work, but it’s worth the effort to know that your church’s finances are under control. Instead of being a source of angst, budgeting should be a way for your church to achieve its mission and do the work of God in your community and the world.


Rev. Dr. Perry J. Hopper, associate executive director at MMBB Financial Services, oversees all aspects of denominational relations and is responsible for coordinating special programs that support MMBB’s mission.

Rev. Dr. Sara E. Day, CFP® brings extensive experience in serving churches to her role as Director of Employer Relationship Management for MMBB Financial Services. In addition to fulfilling the service needs of MMBB employers and their staff in the Midwest for eight years, she served as senior pastor and director of campus ministry at the University Baptist Church in Columbus, Ohio.

1 FreeChurchAccounting.com, How to Create a Church Budget
[ freechurchaccounting.com/churchbudget.html ]

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