by Dale Hubbert
Many biblical lessons are more easily presented than practiced. Stewardship can certainly fall into that category. Living in a world that seems fascinated by materialism provides a greater danger to become entrapped in the money game. It is not possible to live in our society without an interaction with money. The challenge is to become a good manager.
Preachers have many things in common with the balance of society. They share a need for housing, food, clothing, transportation, medical care, and insurance. Preachers and their families share with society the enjoyment of vacations, hobbies, gifts, and social events. All of these things involve money.
One of the most important things for ministers to know is how to structure their compensation with the congregation that employs them. Ministers are unique in that they occupy a dual status in the eyes of the Internal Revenue Service. Ministers are employees for W-2 purposes and self-employed for social security tax purposes. A significant number of ministers and congregations are not aware of this distinction. Serious consequences could arise if there is a failure to understand and properly prepare for these designations.
Most ministers agree to work for a specified amount of money. Often there are very few if any “company” provided benefits, so the minister is responsible for his own taxes, health insurance, transportation, life insurance and retirement. There are usually expectations of the preacher that will require additional expenditures. All of these matters need to be taken into consideration before a financial agreement is reached. It is prudent, as Luke 14 advises, to truly “count the cost” to see that finances are sufficient to meet obligations, needs, and wants.
A properly drafted compensation plan is one of the most effective tools a minister can have. This plan will take into consideration the unique circumstances of both preachers and the congregation the preacher serves. A valuable component of this document for many ministers is an accountable reimbursement plan. It is not unusual for thousands of dollars to be saved annually by creating this document effectively. I strongly urge ministers to use tax accountants who specialize or at least are very familiar with preachers’ taxes.
Social security is another important area. Self-employment tax is a significant if not the largest part of the tax burden for preachers. Ministers, under certain circumstances, can opt out of paying into the social security system. That decision should be carefully considered as it involves more than just a reduction of tax paid each year. It requires an affirmation that the preacher is conscientiously opposed based on religious conviction to the acceptance of any public insurance that makes payment in the event of death, disability, old age, retirement, or medical care. Many people cannot in good faith make such a declaration.
Ministers need to either pay income taxes quarterly or have the congregation withhold taxes for them. While the congregation cannot withhold and match the Medicare and social security taxes, the church can withhold state and local taxes as well as withhold an extra amount of federal tax that would cover the social security and Medicare taxes.
Health insurance is extremely important for preachers and their families. It is sometimes difficult to obtain and expensive, but it the one area that could most quickly dig a deep financial hole if coverage has not been obtained. Congregations are often willing to help in this area and can provide health insurance tax-free as a benefit in most cases.
Life insurance is also important to preachers. There are many kinds of life insurance, and care should be taken to find a trusted representative who will recommend what is most suitable for each particular case. Disability insurance is also worthy of consideration. While insurance premiums can seem a “waste” of money, an untimely death or disability can leave loved ones in difficult circumstances if adequate coverage is not in place.
Preachers need a place to live. Several years ago, it was deemed a good thing for a church to provide a house for the preacher and even the payment of the utilities. While the intention was good, the implications for the preacher are not. The unfortunate part of that arrangement is that when the preacher leaves, the house stays. That is why I urge preachers to get their own house as soon as possible, and congregations get out of the housing business and provide the preacher enough salary to provide his own housing.
Preachers are wise to set up a budget and have an emergency fund. Both ideas are among many good ideas suggested by Dave Ramsey. A budget helps with the discipline needed with finances, while an emergency fund is a great stress reliever when the unexpected comes—and it will!
It is good to make provisions for college if children are headed in that direction. The current cost for tuition, fees, room and board for a year is over $17,000 for an in-state public college. For a private college, the average number is over $39,000 per year.
Most preachers look forward to retirement just like those in other occupations. While the desire hopefully will always remain to share the gospel, the demand for our services in later years as well, as health issues, will likely make it more difficult for all or sometimes any of our income to come from preaching. That knowledge should prompt preachers to make monetary investments toward that time. The complexity of our financial environment increases the value of a good financial planner.
Last, but certainly not least, is the privilege preachers have of giving back to God monetarily. My grandmother many times quoted her mother boldly declaring in my presence that we cannot out give God. How right she was! Though it is a command, the opportunity and blessing far outweigh the necessity. God has such a wonderful way of multiplying our seeds. Preachers above all should appreciate this proven truth.