Sincere Gratitude for a Generous Church

It's been a little over two months since I launched Brokepastor.com. In some ways, it's gone exactly as I expected, and in other ways, it's not gone anything like what I expected.

One of the unexpected aspects of this endeavor has been the number of pastors I've heard from who, without complaining, have shared with me how their respective churches either can not, do not, or will not meet their financial needs. Please note the three categories I just gave.

I've heard from some pastors who shepherd churches that can not support them financially. Many of these churches are very small, and the pastors who serve them are often bi-vocational. I'm sure that, in many of these cases, the churches are doing all they can, and I have nothing but respect for both the pastors and the churches that fall into this category.

Unfortunately, I've heard from other pastors who shepherd churches that do not support them financially. The issue isn't, necessarily, the church's ability to financially support their pastor; it's often simply that no one is thinking about it. It's as if the pastor's financial needs have been forgotten by the church, and there are many pastors out there who feel uncared for by their church in this area.

Worst of all, I've heard from pastors who shepherd churches that will not support them financially. In at least one case, this has been a "power play" by certain leaders within the church (likely) to get the pastor to resign. In other cases, this is the reflection of an ungodly attitude that seems to believe that pastors should be poorly paid in order to keep them humble and faithful to God.

While I have many thoughts on each of these categories that I will probably share in future posts, talking to all of these various pastors has made me even more grateful for the church I pastor. Just last night, our church members voted on next year's operating budget. Included in that budget were very generous raises for myself and our other full-time pastor.

Don't get me wrong. It's not the money that I'm thankful for. It's the heart of our people who always seem to ask, "How much can we do for our pastors?". The kind people of our church are models of how a church should seek to treat it's pastoral staff, and I am sincerely grateful to God for them and for their obvious and practical love for me and my family.

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Should I Opt-Out of Social Security?

Well . . . I'll give you the short answer first and the long answer second.

Short Answer: Only you can answer that question.

Long Answer: Only you can answer that question because your decision has to be based on your own conscience or Biblical/religious convictions. Let me explain.

In order to opt-out of Social Security, pastors must file Form 4361 (titled, “Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners”) affirming the following statement:

I certify that I am conscientiously opposed to, or because of my religious principles I am opposed to, the acceptance (for services I perform as a minister, member of a religious order not under a vow of poverty, or a Christian Science practitioner) of any public insurance that makes payments in the event of death, disability, old age, or retirement; or that makes payments toward the cost of, or provides services for, medical care. (Public insurance includes insurance systems established by the Social Security Act.)

I certify that as a duly ordained, commissioned, or licensed minister of a church or a member of a religious order not under a vow of poverty, I have informed the ordaining, commissioning, or licensing body of my church or order that I am conscientiously opposed to, or because of religious principles, I am opposed to the acceptance (for services I perform as a minister or as a member of a religious order) of any public insurance that makes payments in the event of death, disability, old age, or retirement; or that makes payments toward the cost of, or provides services for, medical care, including the benefits of any insurance system established by the Social Security Act.

I certify that I have never filed Form 2031 to revoke a previous exemption from social security coverage on earnings as a minister, member of a religious order not under a vow of poverty, or a Christian Science practitioner.

I request to be exempted from paying self-employment tax on my earnings from services as a minister, member of a religious order not under a vow of poverty, or a Christian Science practitioner, under section 1402(e) of the Internal Revenue Code. I understand that the exemption, if granted, will apply only to these earnings. Under penalties of perjury, I declare that I have examined this application and to the best of my knowledge and belief, it is true and correct.

What this means is that you must have an honest, religiously-based objection to contributing to Social Security or Medicare out of your ministerial income. Financial/political/personal objections do not count and cannot be honestly used. Your objection must be based on either your conscience or on some Biblical principle.

Obviously, only you can say whether or not you have this kind of religiously-based objection.

Have you made a decision about opting out of Social Security? If so, leave a comment below, or visit me on Facebook and leave a comment there.

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COMING SOON!

HOW TO NOT BE A BROKE PASTOR

Are you struggling to understand the unique and challenging world of pastoral compensation? Are you maximizing the benefits that could be yours by simply being "wise as a serpent and innocent as a dove" when it comes to how you structure your pastoral pay? 

As a pastor, I get it. Not only can our compensation be confusing, but there are also so many different components that need to be balanced . . . it can be hard to put all the pieces together.

How to Not Be a Broke Pastor is written for pastors/ministers and is designed to make the complexities of clergy pay simple and easy to understand, and also to give you ideas as to how you can use your income to the greatest extent possible. We may not have entered the ministry to get rich, but that doesn't mean we should be broke. Let me help you understand and maximize the benefits of your compensation today.

Cashing in our 401(k)

After about a year of pinching every penny we could and living off of what little savings we had, the money ran out. We had completely drained our emergency fund (such as it was). Sure, our tax return that year had helped a lot, but it was not going to cover us for the remainder of the year. We needed more cash. Unfortunately, the only other cash we had on hand was a small 401(k) that I had contributed to with a previous employer.

During seminary, I had gotten a job with a London-based bank known as HSBC. They had an office in Chesapeake, VA, that included an internal debt collection department for their US credit card portfolio. I could spend a month of Sundays telling you stories about the people I talked to during that time. In fact, I used to joke that I learned more about the depravity of man from trying to collect on credit card debt than I ever learned in seminary.

Regardless, it really was a great job, and HSBC was a great company to work for at the time. One of the many reasons why I loved working there was the great 401(k) matching plan they had. We didn't have a lot of money to spare, but we contributed what we could in order to get some of the company's matching grant. Again, we couldn't contribute much, and by the time I left in 2007, our total balance in the 401(k) was around $8,000.

Well, that money was now needed elsewhere! I had to cash it in to make sure we would could pay our monthly bills . . . but it hurt me to do it.

First, it hurt my financial sense. This was our entire "nest egg" at the time. I was about to sacrifice it so that I wouldn't have to lose my home. That alone was difficult to take. Even worse, I had to pay a 10% penalty tax for taking it out early. I was just throwing money away, and I hated it.

But more than that, it hurt my pride. Was this what I had come to? Even as I did it, I knew it was only a band-aid. Eventually, that money would run out too . . . and what was I going to do then? This was the last line of defense, and I was crossing it.

Our situation was about to come to a head.

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COMING SOON!

HOW TO NOT BE A BROKE PASTOR

Are you struggling to understand the unique and challenging world of pastoral compensation? Are you maximizing the benefits that could be yours by simply being "wise as a serpent and innocent as a dove" when it comes to how you structure your pastoral pay? 

As a pastor, I get it. Not only can our compensation be confusing, but there are also so many different components that need to be balanced . . . it can be hard to put all the pieces together.

How to Not Be a Broke Pastor is written for pastors/ministers and is designed to make the complexities of clergy pay simple and easy to understand, and also to give you ideas as to how you can use your income to the greatest extent possible. We may not have entered the ministry to get rich, but that doesn't mean we should be broke. Let me help you understand and maximize the benefits of your compensation today.

We Were Sinking . . . Fast

I often find myself telling my 14 year old son that, some day, he will understand why I do the things I do/say the things I say/decide the things I decide (as a dad). And then, shortly after saying that to him, I have to remind myself that he just cannot understand these things at this point in his life. Even if he believes me (which is doubtful sometimes), there is something about experience that causes you to understand things in a whole new light.

I remember realizing this after becoming a pastor. Even during seminary, I knew that pastoral ministry was going to be hard and stressful at times. I knew the types of situations that would arise. I knew the difficult tasks and decisions that would have to be made. But having never actually experienced any of those things . . . I didn't really know any of it.

Making the transition from the secular workforce to pastoral ministry would have been hard enough on its own, but adding to our situation was the incredible financial stress my wife and I found ourselves under.

Instead of receiving $4,000/month in tax free income, we received only $3,388 - a $612/month shortfall - due to SECA.

Unfortunately, we had maxed out our budget when we had purchased our home. We bought near the end of the housing bubble of 2007, and while the home we ended up buying was the cheapest in our neighborhood and a complete fixer-upper, it was still ridiculously expensive. Our mortgage payment alone ate up over half of my monthly pay, and we could not cover all of our expenses on my income alone.

The only thing we could do to make ends meet was to begin dipping into our emergency savings, but that was only going to last us so long. We were sinking . . . fast.

Why I LOVE Direct Deposit

I'm not aware of any research that would indicate how most churches handle their payroll, but my guess is (just from personal experience) that most churches pay their pastors using a physical check. That's how our church operated for years. I was paid once a month, at the end of the month, by physical check for six years.

Most of the time, that process worked fine. Some months, I might get paid a couple of days before the end of the month; other months, I would get paid on the last day. However, on more than one occasion, I was paid late.

I remember one time in particular when our financial secretary had an emergency in the family right at the end of the month. She immediately left to be with her family and did not come back for a week. Since nobody else in our church at the time knew how to process payroll, what that meant for me was that I did not get paid until the 5th of the new month!

The uncertainty of this method eventually led me to begin looking into direct deposit options for our church staff. Since we use Quickbooks for our bookkeeping, we decided to use Intuit Payroll's direct deposit service. At only $1.75/paycheck deposited, it is an affordable and easy-to-use solution for churches of any size.

Now, payroll is a breeze, and we always get paid on schedule. I LOVE it.

Thoughts on Preparing to be a Pastor

I regret my choices to attend the college I attended and to major in what I majored in.

Actually, that's not 100% true, but it is about 50% true. It has nothing to do with the school itself, per se, nor the degree, but rather . . . with what I wished I had done.

When I first went to college, I attended a Christian, liberal-arts university. At the time, I wanted to become a politician! No joke. However, during the first semester of my freshman year, God changed my heart, and I committed my life to ministry.

Well, in the church context that I grew up in, when a young man like myself wanted to be in some form of ministry, it was expected that he go to Bible college to prepare himself. Trusting that this was sound advice, I left the university I started at and transferred to a small Baptist Bible college in Wisconsin and majored in Evangelism. I was on my way to being fully prepared for ministry!

Or so I thought . . .

While the Bible college I attended was good enough, I soon realized that what I was learning there was not going to be sufficient to truly prepare me for pastoral ministry. If I wanted to be thoroughly prepared, I would need to attend seminary after graduation.

Upon arriving at seminary, I realized that my three years of training in Bible college had been a complete waste of time and money. Not only was I learning the same things in seminary, but I was learning them in a deeper and more helpful way. I could have attended any college, Christian or not, and majored in any subject, sacred or not, and I would have been just as prepared for ministry after seminary as I was going to be despite my Bible college degree.

This realization deepened even more once I became a pastor. While my seminary education was paying dividends on a weekly basis, there were so many things that I didn't know about taxes, banking, insurance, accounting, bookkeeping, and a whole host of other things. After just a couple of years in pastoral ministry, I knew what I wished I had done.

If I could do it over again, I would not have attended a Bible college, nor majored in any ministry related field. In fact, apart from meeting my beautiful wife and setting me down the path that I am on today, I can't see any benefit to my educational choices at the time. 

If I could do it over again, I would have stayed at the Christian, liberal-arts university and majored in either business or accounting. As the lead/senior pastor of our church, either of those degrees would have been extremely helpful in preparing me for the multitude of non-ministry related tasks and decisions that I, and so many other pastors, have had to face.

If you are thinking about pursuing pastoral ministry someday, let me encourage you to spend your college years focused on a business-related major . . . and THEN attend seminary afterwards to prepare yourself theologically and practically. If you follow this advice, you will be putting yourself in an excellent position for success in the pastorate.

Why Didn't Our Church Know?

In my last post, I mentioned that our church was not aware of the fact that what it had seen previously regarding pastoral compensation didn't apply to us. You see, they thought that my pastoral income would be completely tax free, and yet, it wasn't. Why was that?

Well, as I said, when I became a pastor in September 2007, our church was a six-year-old church plant. For those first six years, the man who had pastored our church had been an older, experienced church planter, and sometime before he planted our church in 2001, he had already opted out of Social Security.

Now, in a future post, I'll take some time to talk about the many and varied issues surrounding a pastor's decision to opt out of paying Social Security taxes on his ministerial income, but for now, just know that doing so, generally speaking, makes a pastor's income completely tax free (free from both income tax and SECA).

In my case, however, since I was a brand-new pastor, I had not opted out of paying Social Security taxes. Therefore, while my income was effectively free from income tax, it was not free from SECA . . . but our church didn't understand that distinction nor how it worked.

They just thought that since the former pastor received his full income tax free each month, I would too. They weren't trying to lie to us or mislead us in any way. They just didn't know.

I Wish I had Read this Book Ten Years Ago!

I’ll never forget that phone call.

I was sitting in my study, working on Sunday’s sermon when the phone rang. It was my wife. She had driven with another lady in our church to go to a Women’s Bible Study and had decided to stop at the bank to get $20 from the ATM.

For the very first time in our lives (before or since), we were overdrawn.

I had never experienced that feeling before – sickness and dread and fear all mingled together. To this day, I’m not sure what was worse – hearing the fear in her voice as she struggled to hold back the tears or the feeling of fear in my own heart as I was totally blindsided by the news.

How could this have happened?

After four years of Bible college and four years of seminary, I became the lead pastor of a small, six-year-old, church plant in September 2007. Even though the church was struggling in many ways, they wanted to do the best they could to help provide for us financially. They offered us a starting salary of $48,000/year along with full health coverage for our family.

The best part was, they said, that our salary would be “tax-free” because I was a pastor. We were so excited! We decided to buy a house based on that information. We set our budget based on that information. In fact, we planned a lot of things based on that information.

However, when I got my first monthly paycheck, instead of receiving $4,000, I received $3,388. Something called SECA had taken 15.3% of my expected salary away.

We were devastated.

Less than one month into pastoral ministry, our plans, our budget, and our house payment were all in serious jeopardy . . . and there was nothing we could do about it.

This is why I decided to write How to Not be a Broke Pastor and Structuring Pastoral Compensation. The first is written to and for pastors. The second is written to and for churches. If either I or our church had read these books ten years ago, the situation I just described would have never happened.

However, the old saying is true - you don't know what you don't know. I didn't know enough to ask the right question so that I could understand how my pastoral compensation would actually work. Our church didn't know enough to understand that what they had seen elsewhere wouldn't apply to me.

We were both flying blind . . . and that was the problem.

Welcome to Brokepastor.com

After ten years of thinking about the many complexities surrounding pastoral compensation, I was finally encouraged to sit down and begin to write about everything that I have learned.

The fact of the matter is that there is no single book or resource on the market today focused exclusively on understanding pastoral compensation in a way that I think is truly helpful to both pastors and churches. My goal is to fill that need.

As I begin this journey, my prayer is that I will be a blessing to the thousands of pastors across America who are struggling to understand how to manage their money well.

Sincerely,

S.L. Potts