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Leading a Church During Times of Inflation

Written by Kristen Alexander on Dec 21, 2021 in Finance Management

Read Time: 3.5 minutes

In any season, the proper stewardship of a church or ministry's finances can make or break that organization. However, during times of economic inflation, your congregation and church can be impacted in unique ways.

Let's take a look at the effects of inflation on churches and their members, making sound financial decisions right now, and providing relief for your community in hard times.

Pressure points of inflation

Investopedia defines inflation as "a decrease in the purchasing power of money, reflected in a general increase in the prices of goods and services in an economy."

Before we look at how inflation will affect your church, it's essential to think about how these factors related to inflation will impact the members of your congregation.

Inflation changes your budget due to price increases on general items. Groceries, gas, and clothing are all necessary commodities that can be affected by these changes and can cause hardship for the individuals in need of them. When these prices go up, but cost-of-living increases aren't made or don't match the price increase, this can eat away any savings they might have stashed away. It is important to note that the growth may not be the same across the board. For example, the percentage of increase in groceries may not be the same as the increase in purchasing new clothing.

You can handle these scenarios by adjusting any current budgets. Consider removing unnecessary items or dinners out or cutting down on any subscriptions or entertainment costs until the economy evens out. For anyone living on the bare minimums already, this can cause panic and despair, changing spending habits and impacting the economy even more.

Did you know that your church can establish a benevolence program to help people in need by supplying items like gas, groceries, and rent? With a proper, compliant benevolence policy, you can start helping your community in a more significant way this holiday season.

Check out our Called to Care Suite to create a solid benevolence program to help your congregation in times like these! 

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Further reading: 

3 Ways to Give Benevolence this Holiday Season

How to Have Hard Benevolence Conversations

How inflation affects churches

Now that we know how the economy and inflation can affect your members, let's look at how it can affect your church as a whole.

In much the same way, a church should have a functioning budget and should be tracking it through financial reports. In doing so, you may see some of the same issues that affect your members will affect your church! Your budget was made to account for certain expenses on an annual basis, and that same budget may not stretch as far to accommodate any pricing increases for supplies, curriculum, or repairs.

Generally, the public will see the rise in prices and buy things that won't lose value now while their money is worth the same. This can be seen as stocking up on essentials for the church, such as office supplies and general maintenance products used regularly. Capital investments are also purchased on a shorter timeline than initially planned. 

The problem with this is that the encouraged spending can cause more inflation, feeding back into itself in a loop. This can also raise the cost of borrowing, making it difficult to obtain a loan when you need one. 

The economy is suddenly flooded with cash that people don't particularly want due to its drop in value, so banking institutions generally raise the interest rates to discourage heavy spending and keep inflation close to a target range. (According to Investopedia, who got this information from the International Monetary Fund article linked here, this is generally 2% in developed economies and 3% to 4% in emerging ones). 

 Financial decisions during inflation

So what do you focus on when everything is changing? Start with essential expenses. Adjust your budget, if needed, to account for what is necessary for the church to run on a regular basis. Invest any excess where you can garnish a return on your investment, such as a CD or high yield savings account. This will allow the church to pad any cash it's holding onto with interest while they don't need to use those funds.

If you haven't already, invest in financial reporting. Knowing where you are financially and seeing any trends in spending and anything over budget before the end of the year can be so monumentally important when you are trying to account for every dollar during any economic hardship. Make sure that you partner with someone who understands your organization as a non-profit and church so that you know these expenses and income are tracked in the best way.

Stewarding faithfully

A church thrives off of the donations and tithes of its members. When that is impacted, it can cause hardship to everyone involved. Understanding how that affects your congregation will help you understand how economic inflation will affect your church and help you be better prepared for the future. This enables you to be the best steward of what God has blessed your church with and solidifies faith in your organization and its leadership.

If you need a partner and expert in non-profit finances, our experienced Bookkeepers will be a great fit for you. Let us handle your finances so you can focus on the heavy lifting, and call us toll-free at 877-494-4655

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Please feel free to comment. We always appreciate good dialogue. However, we do moderate each comment to ensure that it is on topic and not derogatory to other participants. We ask that you keep your comments brief and pertinent to the topic so that others may benefit.

Blessings,
Raul Rivera


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