Every month pastoral families in the United States are throwing away money that's rightfully theirs. This year they will literally give away to creditors a minimum of $15,000 to $20,000. In one's working lifetime, an ordained pastor may give up to half a million dollars to the banks and financial companies.
If this seems preposterous, consider the facts. The average American family will pur chase ten vehicles in the first forty years of employment and spend an average of $4,000 in interest on each car loan, adding up to a total of $40,000. In their pastoral work, many clergy probably wear out twice as many vehicles, hence their total could be closer to $80,000.
Annual credit card interest of $1,500 will tally up to $60,000 for those forty years. A loan of $100,000 for a modest home will cost over $200,000 in interest charges. The total for these three financial items is over a third of a million dollars, and we haven't included loans for education, furniture, furnishings, and other major items.
To find out more about how ministerial families manage their finances, in 1998 the Stewardship Ministry of the Pacific Union Conference in the North American Division conducted the first money management survey of local church pastors and conference leaders. The 72-question survey covered three sections. The first part dealt with demography, focusing on social, educational, and ethnic questions. The second and largest, dealt with how pastors manage their money, including everything from their current consumer debt to whether they have an updated will. The final part related to congregational giving and stewardship issues.
Of the approximately 670 pastors surveyed, 387 responded either by filling in the forms at a conference ministerial retreat or sending the forms by direct mail to Loma Linda University Center for Health Research, which was commissioned to compile the final data.
How pastors manage their money
Since four of the seven conferences of the Pacific Union are in California and three of them include two of the largest American cities Los Angeles and San Francisco it was expected that the largest number of pastors would live in a metro area, or surrounding suburbia and in mid-size townships. That proved to be the case, with 91 percent serving in urban areas. Fifty percent of the pastors were facing retirement in the next 15 years. Nearly 80 percent were over the age of 40. Without significant exception, the ethnic background of pastors was consistent with the ethnicity of their congregations.
When it comes to debt, Adventist pastors in America live in a society with a consumer debt (excluding home mortgage) of over six and a half trillion dollars. The first survey question sought to find if the pastors fol lowed the community debt pattern. In this area pastors get high marks, as one-fifth of the Adventist clergy had no debt, and 80 percent had a consumer debt of under $20,000. Seventy-eight percent of the older ministers owed nothing in school loans. Of the pastors under 40, 82 percent planned to pay off their school loans in less than ten years.
How do pastors use the credit card? Nearly 50 percent had two or three credit cards and 36 percent had none. When compared with the average American family, which has 10 to 14 credit or charge cards, Adventist pastors are well below the norm. Only 38 percent of the pastors carried credit card balances at the end of the month, as compared to 75 percent of the general populace. Of those who did carry a monthly balance, 50 percent were under $500 and 86 percent under $4,000.
When it came to credit card limits, 20 percent had less than a $5,000 limit, 40 percent less than $10,000, and less than 5 percent had over $20,000. Half of those who had credit cards did not use a rebate program, with the rest using mainly frequent flyer rewards (22 percent) or a cash rebate (18 percent).
When it comes to home ownership, 64 percent owned a home and 36 percent rented. Of those who rented, 24 per cent have done so for 10 or more years and 18 percent for over 20 years. The fact that one third of Adventist ministers had lived in their current house over six years indicates long tenures in parishes. Of those who owned their homes, 15 percent had either paid up the mortgage or planned to do so in less than five years. 45 percent had less than 20 years before they could bum the mortgage papers. Only one-fifth had more than 25 years before they could claim title to their home. Two troubling aspects of this survey on homes was the gain versus loss ratio resulting from moves to new districts (only a pastor's two previous moves were surveyed) and the lack of planning among pastors that was revealed in relationship to property taxes and household maintenance. When it came to the most recent move by a given pastoral family, two-thirds sustained a loss on their property value. On the relocation preceding the latest, 60 percent suffered loss. This is a major concern since over half the clergy had moved over seven times with 19 percent relocating more than 13 times. Over 25 percent of ministers did not save for property taxes, and two-thirds did not include a maintenance section in their budget for home repairs. On owning a debt-free home upon retirement, only 30 percent said this was a realistic possibility and an equal number indicated that they did not consider it realistic in their case.
In the area of savings, during the last 10 years, the average American family has saved less than 2 percent of their income. Are Adventist pastors any better? Financial planners urge that a family save 10 percent on an annual basis. If the average ordained pastor's gross salary is $4,000, only one-fifth of ministers in this survey saved the necessary 10 percent $400 or more per month. Forty percent of the ministers saved less than $100 per month. One of the best methods to save is to have it deducted from the paycheck by direct deposit; yet 55 percent of Adventist pastors surveyed failed to do this.
Of the 40 percent of pastors who had a savings account, how many had a reserve account for emergencies? Twenty-nine percent said that they had two months' reserve, 19 per cent had three months, and 36 percent had over four months.
The other area of savings we surveyed was in relationship to retirement. Even though a majority of pastors planned to retire in the next 10 to 20 years, over 70 percent were saving less than $2,000 annually, with 64 percent having less than $10,000 currently in tax sheltered annuities. The picture became even more gloomy when the survey revealed that approximately one-third of the clergy were not paying into Social Security and 44 percent of these were saving $100 or less per month.
Vehicle ownership and usage is another important area covered by the study. Ninety-two percent of pas tors owned their vehicles, while others leased. Fifty-nine percent of the 58 individuals who leased, stated it was for their profession or work. The variety of vehicles owned or leased ranged from motorcycles (3 percent), mini vans (22 percent), pickup trucks (20 percent), full-size cars (28 percent), mid- to small-size cars (92 percent) to recreational vehicles (7 percent). Fifty percent of pastors had no vehicle payment. On the total debt owed on all vehicles combined, 9 percent of the ministers owed over $20,000, 18 per cent $10,000 to $20,000, and 27 per cent less than $10,000. The rest owned their vehicles outright.
Having a family budget was important to 40 percent of the pastors with another 40 percent saying they more or less believed in having one. The rest were divided between the extremes of not having one and needing it, and definitely not needing it at all. Nearly two-thirds of the pastors had attended a personal financial seminar with their spouses.
On having wills, 44 percent said they did not have one. Of those who had a will, 25 percent said it was cur rent, and 33 percent indicated that it needed updating.
Coming back to the original question: Are Adventist pastors throwing away their money? Our Financial Survey provided a mixed answer. "Yes" in the areas of saving for short-term and emergencies, and also in the area of long-term planning, such as for retirement, with the most serious lack of planning occurring in the area of home ownership and ministerial moves. "No" when it comes to outstanding debt and credit card purchases. Overall, pastors are to be com mended on their money management principles. With a little tuning, they could pass a financial audit with flying colors!
What pastors should do
Savings. Since their dreams and needs are important to their future, pastoral families need to develop definite savings strategies. This should be considered along with the new retirement plan in North America. One of the weaknesses of pastors is that, because they move approximately every five to eight years, they fail to think and plan long range. Here are four steps to assist pastors in having a viable savings program.
1. Make a list. Sit down with your spouse and write out a list of your dreams Christian education for your children, further professional education, a trip to the Holy Land or the countries of the Reformation, your first home, or being totally debt free from school loans in two years. Once you have made the list, prioritize the items on it. Set a realistic amount to be saved in each pay period. Set a realistic long-term time frame in which to achieve the goals you set. To boost your motivation to save, post a picture in your checkbook or on your bathroom mirror of your new home, your trip, or your degree.
2. Use direct deposit. The easiest way to save money is to have the amount automatically transferred to a savings account. Often your conference will be willing to do this for you. Set a minimum savings goal of 5 percent of your income.
3. Save from unexpected sources. Tax refund is one such source. Over the last five years the annual tax refund for the average American family has been about $1,200.00. Without the magic of compound interest this would amount to close to $50,000 in your 40 years of ministry. Investing the money wisely would make it much more.
4. Save from expected sources. After paying off the last installment on your current vehicle or school loan, start putting that money directly into your savings account. Discipline your self to save the same amount for the next vehicle or other future purchases.
Credit cards. If you are like one of the 25 percent of ministers in our survey, and fail to pay your cards in full each month, keep the total credit limit on your card to a minimum. For most pastors $2,000 would be adequate for daily needs and any unexpected emergency. Only purchase what you have budgeted. Make sure you pay your credit cards within the grace period allowed. In fact, making the payment a week before the end of the grace period will often save you further interest.
On the other hand, if you are like the ministers in our survey who faith fully make their payment each month, then you need to make credit cards work for you by receiving a rebate or other offered benefit. Choose the benefit that is to your advantage. For example, if it's a vacation or the need to visit friends and relatives who live some distance away, get a card with frequent flyer benefits. If you need an automobile, some credit cards offer a 5-percent rebate of up to $3,500.00 toward your next vehicle. If you have three churches in your district fifty or more miles in opposite directions, then make your purchase with a gasoline credit card and receive up to 70 free gallons.
Vehicles. If there is one line item in the pastor's budget that is never satisfied, it is the pastor's vehicle. A number of things can assist the pastor in reducing this financial drain.
Purchase only used vehicles that are no more than two years old and have less than 20,000 miles on the odometer. This will save you between three and five thousand dollars in depreciation and still leave you with a minimum of 15,000 miles under factory warranty.
Determine to pay cash for each vehicle. If you have not done this in the past, here is how you would go about it. Continue to make the monthly installments on your cur rent car and when you have made the last payment, open a new savings account and begin to put away the same amount. Four years later you will have the amount needed to purchase a new pre-owned vehicle. This may seem unachievable, but working determinedly toward such a goal is definitely worth it.
Retirement. Since the average ordained pastor in the United States earns over $50,000 a year (with benefits and tax relief taken in), he or she will earn two million dollars in 40 years of church employment. If you faithfully save 10 percent of your annual income and you received an average of 8.5 percent in interest on your savings, in 40 years you will have 100 percent plus of all the money you would have earned during your working life. For Adventist clergy under the new retirement plan this does not need to be a financial stretch. The local conference gives you 4 percent, plus an additional 1 percent if you match it with another 2 percent of your own money. If you add an additional 3 percent making a total of 5 percent of your own monies, you will achieve the 10 per cent goal for retirement living.
Home purchases. Purchasing a house is perhaps the most difficult financial challenge pastors face. In the last two decades more and more Adventist clergy are staying longer in their parishes; often over ten years, which now gives them the advantage of owning a house. If you plan to be serving your current congregation for the next ten years, it would be wise to purchase a home with a 15-year mortgage. A 15-year mortgage does not mean twice the monthly payment of a 30-year mortgage; in fact, it is usu ally about one-third more. The real advantage is that instead of less than 3 percent equity on a 30-year mortgage in each monthly payment, it is more like 33 percent. If you were to add an additional $200 in principal each month, the home would be paid off in ten years with a saving of over $150,000 in interest.
In all of this it is obvious that a working spouse is a critical variable. This is, of course, a personal matter and one that requires careful thought and prayer.
Providing for your family's current necessities, as well as saving for the future, is a biblical principle. Use the strategies mentioned in this article.
Put the brakes on runaway interest.
And with God's help, give yourself financial security.
