BMA FINANCIAL: Two Things Every Young Pastor Needs to Know About Finances
BT Staff
By Steve Crawley, PhD, Executive Director • BMA Financial
The world of personal finance is vast and can be overwhelming. Yet, regarding financial success, our friend, Amy Artiga from The Pastor's Wallet (pastorswallet.com), distills it down to two key practices. Check out this article where she shares these two key practices:
Because I specialize in working with pastors, I’m always on a quest to get inside pastors’ heads. To serve you effectively, I need to understand your world, needs, wants and struggles. I do this in many ways, such as discussions with my financial planning clients (pastorswallet.com/work-with-us), emails I receive from my readers and the comments in our Pastor’s Wallet Online Community (facebook.com/groups/pastorswallet).
I have noticed a common theme among the struggles pastors face and their regrets regarding finances. There are two things I hear repeatedly that pastors wish they had known or paid attention to. So, young pastors, if you can only do two things, these are the ones you should do. Forget all my blog posts about maximizing the housing allowance and doing your taxes. These two things will be the foundation of your success in every other area of your financial life:
• Stay Out of Debt — As Prov. 22:7 says, the borrower is slave to the lender. Jesus said in Matthew that you cannot serve two masters. Can you really do all God has called you to when you are under obligation to your creditors? What if He calls you to something that doesn’t provide enough money to make your monthly payments? When you’re in debt, you’re working to serve your creditors. You gave them your word that you would.
I don’t think God will supernaturally free you from your creditors just so you can do what He has planned for you. God believes in keeping His word and expects us to do the same, even if it enslaves us. I think He is more concerned with your character and keeping your word than the work He has prepared for you. That can wait. He has all of eternity; He’s in no hurry.
I’m sorry to preach at you like that, but this is serious business. Debt can handicap you for a lifetime (christianfinancialadvisorsnetwork.com/blog/how-should-christians-view-debt). Suppose you put $2,000 on a credit card because you had to attend your best friend’s wedding. Or your computer died, and you needed a new laptop to write your sermons. Or you finally got your own place and needed a couch. It could be anything; everyone seems to find a way to put $2,000 into a credit card.
Credit cards usually have a minimum payment of 2%-5%. Right now, the average interest rate for a new card is 23.18%, so we’ll use that with a 2% minimum payment for our calculations. If you pay $40 a month (2% of $2,000), do you know how long it will take you to pay off that little $2,000 credit card balance? It will take 177 months or over 14 years! On top of that, you’ll end up paying over 3 ½ times as much with over $5,000 in interest. If you don’t believe me, look at it with this calculator — bankrate.com/credit-cards/tools/credit-card-payoff-calculator.
Remember, that’s only a $2,000 credit card balance. Most people carry a lot more debt. How about $50,000 in student loans? Or an $18,000 debt on a car worth $8,000? Like I said, debt can handicap you for a lifetime. It’s really hard to get ahead when you start out so far behind.
• Save for Retirement—Your goal is to get ahead. Get ahead of your monthly expenses so you can put some aside for retirement when you can no longer work. That is the second major area where pastors struggle and fail.
Retirement saving is important for everyone, but no one more so than pastors who opt out of Social Security. At least I can depend on the government to give me a couple thousand dollars a month when I can’t work anymore. I won’t be living in extreme poverty even if I don’t save anything. But if you’ve opted out of Social Security? You don’t even have that to fall back on.
Many young people put off saving for retirement because they think they will have plenty of time and money to take care of it later. After all, they are just starting their careers, saving to buy their first house and about to have a baby. They think it will be easy to start saving once they pass that stage.
But it isn’t. Kids eat more the bigger they get. Then they want to do soccer lessons. Then they break an arm. Then they want to go to summer camp. But you’re still a pastor, so you haven’t gotten a raise in 10 years, despite inflation.
There is no easier time to start saving for retirement than when you are young. When you’re fresh out of college, at least you still think ramen is a full meal. Keep living like a college student to avoid debt and start saving for retirement (pastorswallet.com/retirement-savings-options-for-ministers).
Otherwise, you’ll wake up one day in your mid-50s and realize you have nothing saved for retirement. You’ve worked for decades and have nothing to show for it financially, and you worry that you’ll never be able to retire, even if you get sick. That is depressing and overwhelming, which is why I’m telling you this now.
Avoid debt. Save for retirement. These are the big rocks of your financial life. The things that you should prioritize. Make sure to do these two things and everything else will fall into place around them. No financial trick like a tax-exempt housing allowance or extreme couponing will make much of a difference if you’re $50,000 in debt and have nothing saved for retirement.
Now is the time to take action to avoid future regrets.
Even if this doesn’t apply to you, please share it with a young pastor who could possibly benefit from it.
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