What Should a Church Budget Include?

Church budgeting is essential to managing your church’s finances and even online giving. A well-made church budget outlines all income and expenses related to your church operations. A church budget should also include how much you need to spend to complete your church’s mission – and ensure you have the money to do it.

Read on to learn more about the importance of church budgets and what you should include in them.

Why is a Church Budget Important?

A church budget is important because it defines how your church earns money and where to spend it. Your church budget regulates spending for church programs, making sure all of them are well-funded and can achieve their objectives.

Following a church budget also keeps your church leadership accountable and focused on its mission to spread God’s word.

What the Bible Says About Budgeting

The importance of budgeting is outlined in Scripture. You can find a good example in Luke 14:28-30: 

“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? For if you lay the foundation and are not able to finish it, everyone who sees it will ridicule you, saying, ‘This person began to build and wasn’t able to finish.’”

The passage emphasizes the importance of planning before doing something. A budget is a plan – you define how much money each church program gets before actually spending the money. If you don’t have a plan before running church programs, they may run out of funding part-way through and not meet its objective.

Budgeting also ensures your church spends within its means and doesn’t overextend itself. As stated in Proverbs 22:7: “The rich rule over the poor, and the borrower is slave to the lender.” 

Poor budgeting often leads to loans that might hurt the church in the long term. Instead of serving God, a church with a loan might focus on repaying the lender.

The Difference Between a Budget and a Financial Report

Some churches don’t have a budget because they already have financial reports from the treasurer or bookkeeper. But these are two very different things.

The main difference between the two is their uses. A financial report shows how money is spent after the fact. Meanwhile, a budget shows how the money will be spent before doing so.

Church Budget Types

Church budgeting is very different from home or personal budgeting. Budgeting for a church is closer to budgeting for a business since you’re responsible for the money of dozens or even hundreds of people. 

Here are three common church budget types you can use:

Line Item Budgeting

Also known as incremental budgeting, this is one of the most common budgeting approaches for businesses and churches. This budgeting approach is best used if you already have an established budget – you just take the items from past years and tweak them in anticipation of the upcoming year.

Zero-Based Budgeting

In zero-based budgeting, you start with a zero-dollar balance every year. That means you can’t have any debt left over from the previous year. 

This might not be feasible every year because your church may have emergency needs. But it’s still a good idea to use zero-based budgeting every few years to “reset” your finances.

Program-Based Budgeting

You can also consider budgeting church finances based on the programs you run. This kind of budgeting gives you extra control over which programs get more funding to achieve their goals. You can also spot the programs that may need extra income streams or fundraisers to fund their operations.

Contents of a Church Budget

Your church budget must cover all necessary expenses and possible income streams. Here are several common items you’ll find in a church budget:

• Income streams: This budget item includes all ways your church can receive money. Common income streams are donations, fundraisers, and online or text-based giving. Consider keeping income streams separate if they’re used for specific programs.
• Personnel expenses: This budget item includes staff salaries and benefits like healthcare or insurance. You can also include recruitment costs here.
• Administration and operational costs: Administration costs are usually consistent from year to year. These expenses include building rent and office equipment expenses.
• Facilities and equipment maintenance: Maintenance costs usually stay the same, much like administration costs. These fees include janitorial expenses and audio equipment repairs.
• Direct ministry program expenses: This is usually your church’s primary program. It should cover all costs incurred by your children, youth, and adult ministry initiatives.
• Outreach costs: This budget item covers social events, mission trips, and other evangelism efforts.
• Church growth fund: This item stores the funds your church needs to grow. Even if you can’t expand your church in the coming year, it’s a good idea to save up for it.
• Reserve funds: This is a budget item that holds your emergency funds. Your church should ideally have three months’ worth of reserves to keep running in case your income streams dry up.
• Debt repayments: Debt can include anything from mortgages to loans for large expenses.
• Software costs: Churches may need church management software like Breeze to help manage their day-to-day operations. This means they need to put the cost of implementation into their budget.

Steps to Creating a Church Budget

At this point, you should already decide on the type of budget and define what items go in there. All that’s left is to make the budget. Here’s a three-step guide to doing so:

1. Match Budget With Church Goals

The first step to budgeting is matching it to your church goals. This means more important programs get more funding to achieve what they set out to do. Consult with other members of the church leadership, so everyone agrees about which programs to emphasize and which ones don’t need as much money.

2. Divide Your Expenses

Your church income should be used to pay expenses before you fund any programs. Allocate your income to your outstanding expenses first before picking which programs to fund.

Your church has many programs, and they can’t all be budgeted equally. Your church’s income should be divided to fund programs based on the priorities outlined during the first step.

3. Set Money Aside for Reserves and Growth Costs

After expenses and program funding, the next thing to consider is emergency reserves and growth costs. Emergency reserves are important in case your income stream falters, while growth costs are essential for future expansion. Be sure to set aside money for both these funds once you budget for expenses and church programs.

Church Budgeting Tips

Church budgeting is essential because it ensures your church can achieve its goals without running out of money. Here are four tips to further improve your church budgeting efforts:

Learn From Past Experiences

There’s usually a pattern in how your church earns and spends money. You can use past experiences to inform your budget for the coming financial year.

For instance, you can use previous financial records to estimate how much your church members usually give in a month. You can also check which months have the highest operational or maintenance costs, so you can allocate more money for those periods.

Prepare to Make Budget Cuts

Nobody likes to hear “budget cuts,” but, sometimes, it’s necessary. If you think you’re spending too much on a certain area or program, consider cutting some of its funding. 

That said, you should be careful when planning budget cuts. Don’t make too many budget cuts each year because that makes your church look like it’s going through lots of financial trouble. It can also put the community that relies on you in a vulnerable position. 

Instead of making small cuts throughout the year, consider making one larger cut per year to reduce instability.

Hire a Bookkeeper or Treasurer

Having somebody to watch your church finances provides extra accountability and ensures your money is spent as planned. Your bookkeeper or treasurer should have a financial background or at least a good eye for detail, so you can trust them.

If you can’t justify a full-time bookkeeper, consider getting a trusted volunteer or a part-time worker for the job.

Take Seasonal Changes Into Account

Church attendance, donation income, and operational costs may be inconsistent throughout the year. For example, more people may attend church around December, increasing donation income. Ensure your budget considers all the income and cost fluctuation to prevent overspending.

Get a Free Guide on How to Create a Church Budget

Church budgeting is essential to ensure your church gets enough funding to achieve its goals. Important things to put in the budget include income streams, expenses, and reserve funds. 

To learn more about how to create a budget for your church, download this free guide on How to Build a Church Budget.

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