Making Ends Meet:  How to Live on a

Denominational Salary Stephen Bauer

School of ReligionDepartmental Assembly

April 25, 2013

Working for the Church is not the usual strategy to get rich◦ "sacrificial wage scale"

Depending on the region, you will likely be paid approx. $40,000-$55,000 per year

Working for the Church

I married in the Christmas break of my junior year of college.

My wife and are both frugal by nature and upbringing, which was very helpful for avoiding arguing over money.

For the first 10-12 years together, our budget was simply this:

Our 1st "Budget"

If we don't really, really, REALLY need it, don't buy it.

Tithe, housing, food and transportation were the first priorities (no church school issues yet)

Pay your bills when they come Only use credit cards when you have the

money in hand to cover the cost Avoid debt like the plague

Our 1st "Budget"

The result:◦ Every month we were eking by, living always near

the financial edge.◦ Certain parts of the year were tough

Winter heating season We did try to bulk up the checking account in

advance but there was no set system We never seemed to have money for

saving or fun

Our 1st "Budget"

Then, while in Seminary, our small group at church did an outreach project on teaching people how to make a home budget.◦ Led by fellow seminarian in group with good

financial skills The result changed our life and got rid of

that "living on the edge" tension. We learned to make a real budget and

follow it

Our 1st "Budget"

Income Expenses

The object is to keep Income greater than Expenses

Budgets Manage Two Things

Increase income◦ Problem is that by policy, full-time pastors cannot

moonlight (unless writing a ministry related book/article)

◦ Your spouse may already be working full time and be unable to expand his/her income generation

◦ For most of us, increasing income is nearly impossible

Two ways to help a budget:

Cutting expenses◦ This can be done much more readily

Coupons Sales Doing without (no A/C in summer; no cable TV; use dumb

phone, no house phone; no cable TV; have older car; 1 car; etc.)

Doing for yourself (basic car maintenance, basic home repairs, cooking – minimal eating out, etc.).

With infants: If you have your own laundry, cloth diapers save big $ over disposable if mom is not working outside full time.

For men: can your wife cut your hair (and feel comfortable doing it).

Buy program cars or used cars, never brand new. Buy a basic car, not an expensive one A Honda or Toyota will last just as long as a Volvo or Mercedes for

less money in purchase and maintenance Don’t lease (in most cases)

Two ways to help a budget:

Some conferences pay 2 times per month (24 paychecks per year)

Some pay every 2 weeks (26 paychecks per year)

Budgeting Income:

Example:◦ $42,000 per year after taxes:

2 checks per month = $1,750 per check (42,000÷24=1750)

Every two weeks = $1,615.38 per check (42,000÷26=1615.38)

Net difference = $134.62 per check

Budgeting Income:

If you are receiving 26 checks per year:◦ 10 months you receive two checks per month◦ 2 months you get three checks in the month.◦ If you budget based on 2 per month for 12

months, you can bank the two extra checks (savings or investments) = $3,230.76 per year towards savings or

investments

Budgeting Income:

You can simulate this in a 24 check per year system by systematically putting $134.62 per check into savings or investments.

You must however, make your budget on take-home pay after taxes are withheld. In this example you will likely need to earn around or a bit over $48K in gross income to take home $42k/year (net income) after taxes.

$42K in gross income, plan on about $36K for take home income.

Budgeting Income:

Newly-wed, no children:◦ Resist temptation to move into house, or bigger

apartment◦ Try to live on one salary and bank/invest the

other It is even better if you can live on the smaller salary

◦ If you bank/invest $30k/year in 5 years you can purchase a home with a mortgage smaller than your rent.

◦ Or you can build an investment portfolio that will produce near one salary level of income so the wife can afford to be home as a mother

Budgeting Income

Predictable, constant monthly expenses like Rent, Mortgage, or Car payments can be divided by 2 checks per month

Example:◦ Rent = $1000 per month◦ You need to budget $500 per check

Budgeting Expenses

The most accurate means of budgeting variable items (heat, phones, etc.) is to take 12 months of a given expense and divide by the number of checks per year.◦ Quicken is a great program for tracking actual

expenses by category Example:

Electric bill was $1800 per yearBased on budgeting on 24 pay checks per year this

is $75 per check you need to budget. (26 checks would be $70 per check [69.23 to be exact])

Budgeting Expenses

You will do better if you can figure out your own budget for utilities (gas, electric, etc.) instead of doing their budget plan.◦ On their plan they earn the interest on your

excess money◦ You budget yourself and you get the interest

Budgeting Expenses

Tithe and Offerings Housing (rent or mortgage)

◦ Ideal =max 25%, absolutely not over 30% of income Estimated Income Tax (pastors only) Utilities (i.e. gas, oil, water, sewer, electric, garbage) Phones Car payments, maintenance, registration, and next car Food Hair cuts (for family of 4, this can easily be $700-$1000 per year

pending how many females you pay for) Insurance (car, renter's – homeowners is part of mortgage) Clothes Student loans Church school tuition Savings/Investments Property taxes (if not part of mortgage; taxes on cars, etc.) Etc.

Types of Expenses to Budget

The key is to 1st budget the essentials:◦ Tithe◦ Housing◦ Food◦ Loans◦ Insurances◦ Etc.

Then savings Then discretionary items like golf, eating

out, some clothes, Netflix, etc.

Budget Priorities

This budget has no categories for clothes, entertainment, etc. It is for conceptual purposes only.

First, fill in your regular budget items as per your plan

Then, you can put the difference between your budget items and your check in Misc. This is your discretionary money.

Check your accuracy by calculating the sum of columns a given row. Column G does this. Compare Column G with F (master balance) in the same row and they should match.

25% of MONTHY Income ($5550) is $1375, so $1105 is nicely under max allowable budget.

I use a cash column for Grocery, gas, and pocket money. We take out X amount per check to our wallet/pocketbook.

If you can budget an extra $2-5 per check in several categories, it helps build a small cushion for the whole budget.

Minor tricks:

Especially early, you may need to fine tune several times in the first 3-4 months to figure out what works.

Then you should be able to revise no more than each 6-12 months under normal circumstances.

A sudden change in circumstances (car accident, pregnancy, etc.) can cause an immediate need to adjust the budget.

Always be ready to adjust the Budget

ASAP A good time is in tax season:

◦ Divide your tax refund by % of budget and seed each category (except for actual tithe)

◦ If Utilities are 14% of your total budget, then put 14% of your refund into utilities.

◦ This allows you to have some cushions from the start for making adjustments.

When to Start

Run Budget in an interest bearing checking account

You will soon have balances that give you free checking at most banks, and you earn some interest (which covers a chunk of the cost of buying checks).

Bank Accounts

Do stick closely to your budget plan Don't make impulsive purchases Don't get so rigid with the budget that

cannot adapt to changes as needed. Your budget should be a firm guide to help

you be disciplined, but it should not a strait-jacket

Do's and Don'ts

You can arrange to withhold your own taxes. Use the IRS Estimated Tax forms to calculate your

estimated tax Save extra (I try for $500 extra, minimum) in

case you underestimated. Keep it in a separate savings account to keep the

money from mixing into the family budget. You will send in a quarterly payment to the IRS When you do your taxes (or have them done)

your Form 1040 will inform you if you sent in enough tax. If you did, then the extra in your account is an instant refund – move it to family savings. If not, adjust for next year.

For Ministers

Check your conference/NAD policy book. If they say ministers are required to pay tithe to set an example for the members (which is likely!), you can deduct the minister's tithe (not the spouse's) as a business expense on Schedule C instead of a charitable contribution on Schedule A.

You must write a separate check just for your tithe. Give offerings and spouses tithe through a separate check.

Don't try to double deduct your tithe on Schedule A and C in the same year.

For ministers:

On Sched. C, you put this in the "Other" section, which usually requires an explanation on the back side of the form. I put "Required charitable contributions".

The key is that Schedule C reduces your Schedule SE tax (your version of FICA if under Schedule C income), so $3000 tithe will save you about $450 in Schedule SE.

Schedule SE especially hurts because you must add your parsonage allowance that was deducted from your W-2 back into the income for Schedule SE (but not for Schedule C).

For ministers:

Plan your budget and work your plan Don't try to live too high a lifestyle Avoid debt like it is a plague – if you can do

without, do so to avoid debt. Before kids, try to live on one salary and

build a nest egg for house, etc., from the 2nd salary.

Plan your budget and work your plan!

The Key:

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