I am not a licensed or qualified investment adviser. However, I started saving from my early years in the ministry, when we had very little income. There are some common-sense ways that preachers can and should implement financial planning when they are young.
My initial advice is to get out of debt. Your best investment is to remove all debt including, if possible, any car payments. Secondly you need to establish an emergency fund. Unexpected expenses happen to us all and we must plan on having enough money available to cover repairs, medical expenses, and other emergency needs. Generally, it is recommended for you to have enough money to get you through three to six months.
Once you are out of debt and have established an emergency fund you should begin to save and invest for the future. Consider that something is better than nothing, so even if it is a small amount, it is important to get started. Ideally every wage earner should save fifteen percent of their income for the future. If you believe that is more than you can handle initially then save ten present or at least five percent of your income. A budget is important and it should include a savings plan. Without savings being part of your budget, it is insufficient.
The vast majority of pastors I know are humble men. They are in the ministry to serve and compensation is secondary to their service. Often preachers never discuss their needs with the church. In some cases, men receive no salary or benefits from the church and must work a secular job in addition to his ministerial tasks. This is becoming more prevalent than in the past. Even if the church has limited ability to support the pastor adequately the church and the pastor must not ignore saving for retirement.
Failure of the pastor and the church to develop a financial savings plan can have serious consequences. What happens when a retiring pastor leads a church for forty years and has no savings and the church has provided no savings? There are three choices: 1. The church can hold a going away party, provide and gift card, and present the pastor with a plaque for his service. 2. The church may feel obligated to help the pastor rather than abandon him and the church leaders choose to take money out of the future budgets to support him. 3. The church and the pastor could plan ahead by setting aside a little each year that accumulates so that the preacher has sufficient proceeds to enable him to live and not take money from the budget of the pastor who follows him. The obvious answer is number three. This protects the church and provides for the pastor. This is not as hard as you might think, because length of time is the key to building a nest egg.
During your early years of ministry, the need to save for retirement mat not be at the top of your list but it should be. Churches should be trained to understand this need and establish a plan that rewards tenure. A preacher that lives in a parsonage is a great benefit but over time he misses out on any appreciation if he had owned a home. Churches that have a parsonage should provide 2% – 4% per year of a median priced home as compensation. This money should be placed in a retirement portfolio on a monthly or yearly basis.
