HELPING LEADERS BECOME
B E T T E R S T E WA R D S .
Church Financial Wellness Presented by: MMBB Financial Services
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Table of Contents FINANCIAL WELLNESS: AN ADDED BENEFIT FOR YOUR STAFF
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SUCCESSFUL INTERVIEWING STRATEGIES FOR CHURCH LEADERS
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You might be familiar with the saying, “knowledge is power.” When people increase their understanding and acquire tools that allow them to gain a firm financial footing, it empowers them to take the steps that create financial health. So, just what is financial wellness?
Whether it is by phone, in person — either one-on-one or with a search committee — interviewing is one of the most important steps in the hiring process. You can increase the likelihood of hiring the person who is right for the position by thinking ahead about the correct approach.
By Louis P. Barbarin, CPA
Strategies for interviewing candidates for churches and faith-based organizations and the corporate world are very similar. One big distinction — in the church or churchrelated organizations, candidates often have a sense of being called to serve with the church or organization. This not only applies to those who are called to serve as pastors or other ministerial positions, but many people want to feel as though their work contributes to the greater good and serves God.
DEBT MANAGEMENT: ONE OF THE KEYS TO FINANCIAL WELLNESS 6 Is debt distracting you from your ministry? As servants of God, we often place the needs of our congregation first, especially when it comes to finances. Salaries paid to pastors and church workers are often lower than comparable positions with similar educational training, so managing debt places an even greater burden on you. When debt goes unaddressed, over time it can grow into a bigger hurdle to overcome.
By Rev. Dr. Patricia Hunter, CFP®
ESTATE PLANNING: GETTING AFFAIRS IN ORDER ISN’T JUST FOR SENIORS
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Like adults in their 40s and older, millennials should have a basic estate plan in place in the event of an emergency or untimely death.
By Vincent Schera and Rev. Dr. Perry J. Hopper
PLANNING THE CHURCH BUDGET Coming in December 2017
Get the WHOLE Story!
By Matthew D. Hoffman, CFP®, ChFC ®
RETIREMENT PLANNING FOR MILLENNIALS
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When discussing the need for retirement planning, millennials might not be the first age group that comes to mind. However, over the next decade — as the first millennials begin to reach middle age — it’s likely they’ll prioritize retirement as other generations have.
By Colin Nass, CFP®, AEP®, RICP®
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For more expert advice from the MMBB team, download the “Finances & Administration for Church Leaders” eBook
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Financial wellness: an added benefit for your staff By Louis P. Barbarin, CPA Perhaps you have heard of or read about ‘financial wellness’ in the workplace. It’s one of the new buzzwords used to describe the range of financial services that some companies are making available to their employees.
• A strong financial foundation defined as little or no debt, an emergency savings fund, and living below one’s means; and • A n ongoing plan that leads the participant on a path to meet future financial goals.
So, just what is financial wellness?
Essentially, financial wellness is a state in which you practice wise planning, spending and saving with regards to the financial resources that God puts at your disposal. As many of us have learned from church Bible study and sermons we have heard from the pulpit, this is the foundation of good stewardship. Even though we all have different amounts of financial resources available to us, living with a sense of financial wellness means that you have an honest understanding of your financial circumstances and you manage them so you can be prepared for the inevitable financial adjustments that arise. The concept of financial wellness might be a relatively new idea, but the church has been offering financial advice since the Bible was written. The Bible teaches about money and managing finances
According to Tom Rath and Jim Harter, leaders of workplace wellbeing research for Gallup, financial wellness is defined as “effectively managing your economic life.” Financial wellness can also be defined as “a complex balance of the psychological, spiritual, and physical aspects of money management that results in a financially healthy life.”1 Those who achieve financial wellness are able to live a life characterized by: • Minimal financial stress; • A n understanding of where their money is coming from and where it’s going; 4
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often, and offers financial wisdom as critical to a godly life. “Through wisdom a house is built, and by understanding it is established; by knowledge the rooms are filled with all precious and pleasant riches.” Proverbs 24:3-4 (NKJV) As financial service providers recognize the specific economic challenges of the clergy and church workers — especially issues concerning debt that often cause considerable stress — they are taking a more integrated approach that addresses the totality of financial priorities. The underlying concept of financial wellness is financial preparedness, one of the most common goals of employees today. However, few report having access to the kinds of financial services and benefits that they feel would be most helpful. What’s missing is a more comprehensive approach to financial wellness, one that helps employees address the day-to-day financial responsibilities and deal with unexpected financial concerns while build lasting financial strength and stability. Employer-based financial wellness is often seen as a supplemental benefit, but the financial health of employees should be viewed in the same way as other health and wellness programs that employers offer. These services don’t just take care of employees when they’re sick; they also lead to increased productivity as employees feel more confident about their financial circumstances. Who can better understand the connection between the mind, body and spirit than the church? Financial wellness programs should work in the same way, offering support and advice to employees so they can meet shortterm needs while working toward long-range goals. Each employee has different financial priorities and obligations, so a successful financial wellness program requires solutions tailored to each employee’s unique circumstances, whether the concerns are with paying off debt, establishing an emergency fund, saving for education, or retirement planning. Understanding the concepts of good financial health and having the right tools to act on that knowledge is key. Therefore, employees not only need education, but also the opportunity to take action as a result of receiving new information. For some, this simply means using software or an app to track financial goals. For others, having a financial consultant to review their finances and offer guidance helps with accountability and engagement with their goals. When financial wellness is achieved, employees have the ability to make better, more informed decisions and manage a successful, long-term financial strategy. You might be familiar with the saying, “knowledge is power.” When people increase their understanding and acquire tools that allow them to gain a firm financial footing, it empowers them to take the steps that create financial health. 1
Financial Finesse Think Tank, 2014, Financial Finesse, Inc.
Louis P. Barbarin, CPA is Chief Executive Officer of MMBB Financial Services [ www.mmbb.org]. Prior to assuming that role, he served as treasurer, CFO and deputy executive director. Prior to joining MMBB, Barbarin served as deputy executive director and treasurer of American Baptist Board of Education and Publication.
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Defy the odds and Eliminate Bills Today
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Debt management: one of the keys to financial wellness By Rev. Dr. Patricia Hunter, CFP®
In today’s world, most of us have debt. One of the keys to achieving financial wellness is learning how to manage that debt. Debt does not have to be an insurmountable problem Is debt distracting you from your ministry? As servants of God, we often place the needs of our congregation first, especially when it comes to finances. Salaries paid to pastors and church workers are often lower than comparable positions with similar educational training, so managing debt places an even greater burden on you. When debt goes unaddressed, over time it can grow into a bigger hurdle to overcome. Getting started on a plan to reduce debt might seem daunting, but the sooner one begins to tackle their financial situation, the easier it will become to manage it. Taking practical steps to manage your debt, such as establishing your financial goals, developing a budget, and eliminating expenses, will put you well on your way to financial wellness. Establishing your goals The first step in managing your debt is to establish goals. A simple way to organize your financial goals is to break them down into short-term and long-term. Short-term goals are quick wins or smaller steps that will have an immediate visible effect on your finances. They start when a plan is put together to adjust spending habits and lifestyle. Long-term goals are those which you can achieve in two years or more, and typically require additional funds. Setting these goals will enable you to begin to pay off debt, contribute to an emergency or retirement fund, or pay down a mortgage. When setting your goals remember to be S.M.A.R.T. — Specific, Measurable, Attainable, Relevant and Time-limited. To stay focused, be specific when describing your goals. You also need to be realistic. When people set goals that are overly ambitious, they tend to give up before reaching them. Goals should be difficult to achieve, but not impossible. Prioritize your goals and monitor your progress. Celebrate when you hit a milestone. Setting S.M.A.R.T. goals helps you stay focused on achieving them. Once your goals are established, it’s time to dive deeper and develop a budget. Developing a budget Budgeting is an important component of financial success and allows you to have some control over what you spend. A monthly budget will help you decide how to spend your money, pay off existing debt, and establish regular savings. This will enable you to plan for the future. The easiest way to start budgeting is to list your income sources, including salary, Social Security, annuities, fixed income payments or stipends. Next, write down every expense you have each month. Some expenses will vary, and might be quarterly or yearly, but be sure to include these, as well. churchexecutive.com
Once you have a rough draft of your budget, you can compare costs and fine tune as you track your monthly spending. Having a budget allows you to know how much you make, spend, who you owe and how much you owe. Knowledge is power when it comes to getting serious about your savings goals and eliminating expenses. Eliminating expenses The final step in managing debt is eliminating expenses. What do your current expenses tell you about your spending behavior? Are there expenses you can get rid of? The “must” expenses (housing, utilities, food, child care, insurance, auto) need to be paid. “Optional” expenses (dining out, luxury items, vacations, movie tickets) should be carefully reviewed. Once you have identified your sources of income and made a budget of all your expenses, set some realistic goals to reduce costs and increase the amounts being saved for long-term goals. If you’re primarily paying off credit cards and bills, you will need to reduce or eliminate optional expenses. Review the terms of the bills, and identify interest rates to determine which expenses should be paid off first. As soon as a credit card is paid off and has a zero balance, cut it up. If there is too much temptation to use it again, close the account. Review and adjust Review your spending and saving on a monthly basis to track your progress. If you are not where you want to be, adjust your plan accordingly. You might need an additional source of income if there are no more options for cutting expenses. We often have to learn to make difficult choices regarding money if we want to reach our financial goals. Remember to celebrate your savings and expense reduction milestones with your family or friends as a way to keep yourself motivated. By addressing debt head on, you will be on the path to reaching your financial goals and creating financial wellness for you and your family. MMBB Financial Planning Manager Rev. Dr. Patricia L. Hunter, CFP® brings 25 years of experience to her ministry. Before joining MMBB [ mmbb.org ] in 1987, she served as assistant pastor of the Mount Zion Baptist Church in Seattle. She is a graduate of Seattle University, where she taught Womanist Theology and Black Church History. Hunter also has a master of divinity degree from Colgate Rochester Crozer Divinity School and a doctor of ministry degree from the Saint Paul School of Theology (Kansas City, Mo.) In 2008, she earned her certification as a CERTIFIED FINANCIAL PLANNER™ professional.
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ESTATE PLANNING: getting affairs in order isn’t just for seniors By Matthew D. Hoffman, CFP®, ChFC®
When we think about estate planning, drafting a will, and getting your financial affairs in order, millennials aren’t the first demographic group that come to mind.
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Most people don’t start to think about this topic until they’re a little older and more established; they usually have achieved milestones such as marriage, homeownership and parenthood. According to a recent study on Caring.com, nearly 80 percent of the younger generation seem unconcerned about the future, with only 22 percent of 18- to 36-year-old Americans having a planned will or trust. Two of the most common reasons for not planning were: (1) they felt they did not have enough assets to warrant making a will or doing some estate planning, and (2) they felt they still had time before they needed to make plans. It’s no surprise that people in their 20s and 30s would not have estate planning at the top of their list of financial priorities. In their minds, the creation of legal documents — such as living wills, last wills and testaments, medical and legal powers of attorney, and trusts — are akin to speaking a foreign language. Most believe that you don’t need to work on these plans or documents until you reach your 50s or 60s. In a March 2017 article, USA Today reported that millennials (those born roughly between 1986 and 2000) would rather enjoy the present than prepare for the future. The millennial group includes individuals who are young professionals and those just graduating from college or seminary. Many of them might be in the process of repaying student loans while they work towards professional career goals and others are attending college after postponing it. They might not have a lot of money now, but this is the time in their lives when it’s important to start saving and investing for the future. Like adults in their 40s and older, they too should have a basic estate plan in place in the event of an emergency or untimely death, which can happen at any age. The elements of estate planning Basic estate planning tools for millennials might include a will, trusts, life insurance, employee benefit plans, and healthcare directives and powers of attorney. The will allows the individual to name a personal representative to handle his or her estate and can name the guardian for his or her children if both parents should die. This can be critical for millennials who are parents of young children. A will also provides for the disposal of sentimental assets to family or friends, and is the place to state funeral wishes. The trust is a useful instrument for managing the assets of an estate. A trust may be created while still alive or contained within a will. churchexecutive.com
Life insurance provides for a family in the event of death by replacing lost income and covering additional expenses resulting from the death. Employee benefit plans might include a retirement plan and group life insurance benefits. If participating in either plan, be certain that the beneficiary designations name the correct person or entity, as these are not governed by a will. Healthcare directives and certain types of Powers of Attorney may ensure that someone who you have chosen has the authority to act on your behalf if you are incapacitated due to an accident or sudden illness. Stop and think The first step in estate planning for millennials (or anyone) should be to take some time to ask yourself the following questions: What happens if . . . Who should receive my assets? Spouse? Siblings? Friends? Charity? Who should be the executor of my estate? There are no right or wrong answers; they are personal and specific to the individual. Ideally, estate plans should be established when millennials are young adults, and then reevaluated throughout their lifetime as priorities and life circumstances change. The Caring.com study also shows overall, that Americans need to take estate planning far more seriously than they do presently, and they need to get started earlier in life. Just one in five millennials say they have a will or living trust. Creating a will is a good first step to take, and can offer a sense of peace of mind regardless of your age. Most local attorneys can draft a Last Will and Testament at an affordable rate, and there are now many low-cost do-it-yourself options available. Also, a Certified Financial Planner™ professional will be able to assist you in the estate planning process. Don’t put off making decisions that will affect how and where your assets will be allocated. Take the first step toward getting your affairs in order. Matthew D. Hoffman, CFP®, ChFC® is Chief Client Services Officer and is also an officer of MMBB [ www.mmbb.org ] serving as Corporate Secretary. Hoffman has worked extensively in the financial services industry. Prior to joining MMBB, he was a vice president at JPMorgan Chase and a financial advisor in the private client group at Merrill Lynch. C H U R C H F I N A N C I A L W E L L N E S S • CHURCH EXECUTIVE
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Retirement planning for millennials By Colin Nass, CFP®, AEP®, RICP®
When discussing the need for retirement planning, millennials might not be the first age group that comes to mind. Millennials — also known as Generation Y — were born after 1980, and they’re the first generation to come of age in the new millennium. Typically, researchers use the early 1980s as the years when the first millennials were born and the mid1990s to 2000 to mark their ending birth years. In 2016, the Pew Research Center found that millennials have surpassed baby boomers to become the largest living generation in the United States. This is important to note as we discuss retirement planning for millennials. Retirement planning is basically the same for all generations; it refers to the planning one does to prepare for life after paid work ends — not just financially, but generally. The non-financial aspects include lifestyle choices, such as how to spend your time in retirement, where to live, and when to stop working completely. The emphasis on retirement planning changes throughout different life stages. For millennials, or those beginning their working lives, retirement planning is about getting an early start on saving for retirement. Even though research has shown that millennials are joining the workforce during a tough economic time, they’ve remained optimistic. A recent survey by the Pew Research Center shows roughly nine in 10 millennials believe they have enough money, or that they will eventually reach their long-term financial goals. 10
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A few key characteristics Unlike previous generations, millennials will likely have several jobs over the course of their lifetime. They prefer urban living (or the flexibility to relocate in pursuit of their professional goals) and choose to rent versus own a home. Millennials might also be burdened with a staggering amount of student debt and have difficulty finding a job, delaying any thoughts of saving. Many find the concept of retirement abstract and distant. They grew up with the financial crisis of 2008, the housing bust and subsequent recession, which might explain why many of them are not as interested as prior generations in investing or in home ownership. Statistics from a UBS Wealth Management survey show that for more than 39% of millennials — a higher percentage than any other group — cash is the preferred way to invest money they won’t need for at least 10 years. That’s three times the number who chose to invest in the stock market, even though the S&P 500 has gained approximately 15% over the past year while most cash investment yields remain below 1%!
Millennials also differ from previous generations when it comes to researching financial products and services. They turn to their online networks when making purchasing decisions. As the first generation of “digital natives,” growing up with computers, smartphones, tablets and access to the internet has shaped how they shop for products and services. They are accustomed to having instant access to price comparisons, product information and peer reviews from their mobile devices. A recent article in Forbes Magazine, “10 New Findings About the Millennial Consumer,” reports that 33% of millennials rely mostly on blogs before they make a purchase, compared to fewer than 3% for TV news, magazines and books. The article also points out that millennials turn to social media for an authentic look at what’s going on in the world, whereas older generations rely more on traditional media. How does this information affect the way financial planners work with Millennials? Traditionally, financial firms have emphasized the management of assets, estate planning and minimizing taxes. Millennials don’t want to overly commit to one long-term goal, such as retirement, at the expense of lifestyle goals, such as purchasing cars and saving for and planning vacations and weddings. Traditional financial planners or advisers charge fees based upon assets under management, and millennials frequently don’t have significant assets. Thus, they’ve become the digital do-ityourself retirement generation. A recent Investment News article found that 70% of millennials believe they would get higher returns from a “robo adviser” than a live adviser, and 84% expect to receive more objective advice from a digital advice platform. Typically, they don’t need access to information; they need access to knowledge and expertise. Financial planners, therefore, need to function more like a personal trainer or life coach — helping them to stay focused on their goals — rather than a traditional financial planner, focusing on investment management, retirement and estate planning. One of the biggest financial obstacles this generation faces in achieving financial independence is debt. More than 60% of those surveyed recently by TD Bank say that becoming debt-free would make them feel like they’ve “made it,” financially. Creating other income streams will be critical for millennials to reduce the amount of debt they’re carrying. A side job that earns $500 a month today could build to provide $1,000 a month in a few years and $2,000 a month in five or 10 years. A good example of this are bloggers, a field that didn’t exist 20 years ago, which now provides the opportunity to create a steady stream of additional income that can help millennials reach their financial goals. The bottom line is that millennials face additional challenges, including student loan debt, job insecurity, the need for mobility and flexibility, and juggling multiple goals that compete for limited resources. Over the next decade, as the first millennials begin to reach middle age, it’s likely they’ll prioritize retirement as other generations have. The result will be that millennials will have fewer years to plan for and save for retirement. Colin Nass, CFP®, AEP®, RICP® is the Senior Wealth Manager in the Financial Planning Division at MMBB Financial Services [ www.mmbb.org ]. He uses his 20+ years of financial planning and investment experience to assist members in achieving financial goals. Footnotes were omitted.
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Successful interviewing strategies for church leaders By Vincent Schera and Rev. Dr. Perry J. Hopper Whether it is by phone, in person — either one-on-one or with a search committee — interviewing is one of the most important steps in the hiring process. You can increase the likelihood of hiring the person who is right for the position by thinking ahead about the correct approach. Strategies for interviewing candidates for churches and faith-based organizations and the corporate world are very similar. One big distinction — in the church or church-related organizations, candidates often have a sense of being called to serve with the church or organization. This not only applies to those who are called to serve as pastors or other ministerial positions, but many people want to feel as though their work contributes to the greater good and serves God.
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Prior to conducting an interview, you will need to review the résumés closely to formulate questions based upon the candidate’s experience. • What did they learn from past job experiences? Ask about their successes as well as their failures. What, if anything, would they have done differently? • For congregational leaders, ask about their management style. How would your staff and your leadership speak about you? • Also, be sure to ask situational questions that point to how they might handle a specific event or incident. This will help you to determine how the candidate might deal with certain highpressure circumstances and staff issues. • If the candidate has held a number of positions over a brief period of time, you might want to determine why they have moved around so much. One of the first things to do when conducting an interview is to create a relaxed atmosphere that encourages a candidate to open up and speak comfortably about him or herself. It is important to determine why the candidate is interested in the position. • What are some of their core gifts and talents? • In the case of a clergy person, why do they feel spiritually led to seek this position? Think about what qualities and competencies the congregation needs in a pastor. Is it strong preaching and teaching skills, executive and administrative skills, or are you seeking a person with gifts for pastoral care? • Ask why they left their last position. There are many reasons, all of which will help in making the hiring decision. • A sk if they can visualize themselves in this position, doing meaningful work and making an impact. What might that look like? Are they a cultural fit? When speaking with the candidate, you want to determine if he or she will be a cultural fit for your organization. In the corporate setting, cultural fit often involves assessing how the goals and expectations of the candidate compare with that of the company. Churches look for a spiritual and theological connection as well as a cultural fit; they want an understanding of the candidate’s foundational beliefs in areas such as discipleship, mission or stewardship. How do they view their role in the changing landscape of the church today? Is the candidate for senior pastor, associate pastor, youth minister, or music minister able to tell you why they feel called to be a part of your church or organization and what sets it apart from others? Has the candidate researched your church or organization? This demonstrates a high level of interest. Is it somewhere that they would like to be? Typically, in the corporate world, the human resources manager will conduct the initial interview before sending the candidate to meet with the hiring manager or others in the organization. In a church, the person(s) responsible for conducting the interview will depend on the size of the church and whether they are multi-staff or single person (pastor and secretary). There might also be a pulpit search committee made up of key leaders from the church who recommend a pastoral candidate for consideration. Typically, search teams will look to gain a sense of a clergy person’s gifts and skills. churchexecutive.com
In many cases, church by-laws will stipulate the duties and responsibilities for a particular position. More and more, churches are relying on the same interview strategies and hiring practices as the corporate world. The use of employment contracts, a longtime corporate practice, is becoming more common in church organizations, such as the minister/church agreement, a formal agreement for employment over a period of time listing expectations and accountability. Always allow sufficient time for questions at the end of the interview. Be as clear as possible about the next steps. Let the candidate know where they stand — i.e., are they the first person to be interviewed, and are there additional interviews scheduled? In many churches, pastoral candidates will be invited to preach a sermon or teach a Bible study lesson as part of the selection process. They might also be required to meet with the church leadership and the congregation. Most importantly, be sure to be in touch with the candidate regardless of the decision. If the candidate was not selected, you might choose to offer feedback that could be helpful to the candidate as a matter of professional courtesy. Vincent Schera is chief human resources officer at MMBB Financial Services [ www.mmbb.org ], where he implements and manages all HCM policies and programs for MMBB. Rev. Dr. Perry J. Hopper is associate executive director at MMBB Financial Services, oversees all aspects of denominational relations, and is responsible for coordinating special programs that support MMBB’s mission. C H U R C H F I N A N C I A L W E L L N E S S • CHURCH EXECUTIVE
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