Getting Started in Investing, part 3


Hey honey, are you spending more money at the grocery store or something? This was something I found myself saying to Kristen over and over again in our tenure in youth ministry. With a growing family it just seemed like every month we made a little less money. We had a budget. We did our best to control spending. But before we knew it our expenses exceeded our monthly income and we had too much month and not enough paycheck. At first it was $100 here or there. But by the end we found ourselves several hundred dollars per month short each month. This slowly depleted our savings and towards the end, with no savings, we had little choice but to use a credit card to make ends meet.

In Part 2 of this series we talked about dealing with the monster of debt & savings. But this is how we acquired this debt in the first place! It wasn’t that we didn’t control our spending and lived a lavish lifestyle worthy of acquiring debt. It was that the price of groceries, gas, utilities, and taxes that shot up by 3-4% per year and our income remained stagnant. As years go by this compounded and we actually made less than we thought.

COLA stands for “Cost of living adjustment.” I need to spell it out because so few of us in ministry never experience it. Some churches try to call it a raise, it is not. Each year actuarialists at the federal government determine cost factors and determine what increase in income you would require in order to maintain the same standard of living. In other words… not getting COLA means that each year you take a pay cut! The assumption by utilities and tax boards is that you will receive this increase, which is why all of your expenses “magically” go up by about that amount each year. It’s not optional or imaginary, it happens.

Here’s an example of the last 5 years and what a COLA should look like for a typical youth workers income. For someone hired in 2004 with a base salary of $35,000, this is what the last 5 year’s would look like.

Year COLA Adjusted Income
Non-Cola Adjusted Income
2005 (4.1%) $36,435 $35,000
2006 (3.3%) $37,637 $35,000
2007 (2.3%) $38,503 $35,000
2008 (5.8%) $40,736 $35,000
2009 (6.2% est) $43,262 $35,000

And this isn’t even considered a raise in salary! This is just to keep up with inflation over the last 5 years. Looking at it from a monthly budget perspective, the difference between a COLA adjusted and non-COLA adjusted income is $636 per month. So if this employee feels like there is a lot less paycheck to go around… it is because there is! They are being faithful to a ministry that is paying them a decreasing amount every month.

Just to rub some salt in the wound, here is what it would look like if over that same period you averaged a modest 3% raise with your COLA.

Year COLA Adjusted 3% Annual Raise
2005 (4.1%) $36,435 $37,485
2006 (3.3%) $37,637 $39,487
2007 (2.3%) $38,503 $41,580
2008 (5.8%) $40,736 $45,229
2009 (6.2% est) $43,262 $49,391

Yes, that would mean that this same employee would be taking home $1200 more per month than the employee who did not receive a raise or COLA just 5 years into a tenure. How much more comfortable would you be with $1200 more in your pocket per month? This isn’t excessive, this is just what your peers experience in the business and government sector. This is what your neighbors receive. This is what it is expected you receive.

In all honesty, this is the difference between a sustainable income that will keep you in ministry for decades and an income that will bury you in financial burden and burn you out in five years. If you want to be in ministry for a long time, you need to get at least a COLA annually or you are accepting a pay cut.

But my church is in financial trouble, what do I do?

Listen, I know that no one goes into ministry to get rich. Having worked for years in Michigan I know what its like to work at a church in recession. (Michigan’s recession started in 2005, now it is deep in a depressionary state.) But while the short-term makes sense to take a cut here or there or not accept a COLA or raise… you are really not helping the church. In fact, what you are doing is contributing to the problem by having a staff stressed out with money worries!

So, what do you do? Some negotiation options. Provide some reasonable alternatives to cutting your pay. (Remember, no COLA is a pay cut!)

– Tell them no.

– Tell them to cut somewhere else.

If they have no choice but to suspend your COLA or even cut your pay here are some options that I would suggest.

1. Get the leaders to spell out the plan to you.With decreases in monthly giving this is where we are at, this is what we are doing to get things in line.” Find out how your COLA fits into their plan. If they don’t have a plan, ask them to formulate one so your family doesn’t suffer from their lack of foresight. Be a leader to those leaders.

2. Have the leaders acknowledge verbally that they are asking you to accept a pay cut. Get them to be honest, is this a result of poor performance or is this the result of poor planning, unexpected expenses, unexpected decreased giving, etc. Often times church leaders are so passive-aggressive that they will suspend stuff like COLA or increases because they feel you are under-performing but won’t actually tell you this to your face. If that’s not the case… get them to spell that out to you. Because accepting a pay DECREASE feels a lot like punishment.

3. If COLA simply isn’t possible, tell them you will accept a suspension of COLA in lew of receiving it now. Ask them to sign a promisary note for their plan. If you didn’t get a 2008 COLA and won’t get a 2009 COLA, that’s a 13% DECREASE in income to you. If they can’t provide you with a 2010 COLA, will they promise you $10,000 in make-up and 3 months notice for you to find a new ministry?

4. Negotiate for a lesser COLA. The 2009 increase is likely to be over 6%! If they can’t swing it, meet them half way at 3%.

5. Accept the suspension of COLA as a loan. Again, ask them to enter into a promisary note with you. If they don’t have the increase now allow them the option of paying it back to you over time.

6. Negotiate for time off to earn income somewhere else. In lew of a COLA for 2008-2009, ask for 4 weeks of paid time off where you can supliment that income by working at a camp, another ministry, or even a part-time job. Would they allow you to work 8 hours less per week so you could get a job at Starbucks?

Some of these may seem extreme. But remember the goal… your goal is to do ministry for a LONG time. And a big part of being in ministry for the long haul is not constantly being stressed out about money. There are times when you should be meek and humble. But when it comes to feeding your family you should be aggressive to protect them. The reality is that during your career you will earn much less than your peers in for-profit business. Demanding that your ministry pay an annual COLA is hardly robbing a ministry. In fact, it is investing in their most valuable resources… their staff.





6 responses to “Getting Started in Investing, part 3”

  1. Jason Avatar

    As a financial professional who’s been on staff in churches I have to say, I love this post and couldn’t possibly agree more! As ministers, we’re too often willing to ‘take one for the team’, especially due to the volunteer environment we work in. But pay cuts are going to cause serious stress and problems that will last a LONG time. Remember, your responsibility is first to your family, then the rest of the church (I Tim 5:8). You can’t help other people if you can’t make ends meet. If the ministry role you play is important to the church, the leadership will find a way to pay. You are caring for the flock, and the church MUST be willing to care for you. If not, I urge you to find a place where your hard work is truly valued.

    The other thing I really liked about this post is this puts everything out on the table, calling a spade a spade, with no vague spots. Churches are often known for their lack of communication, and something this important needs to be clearly defined, so don’t be afraid to ask tough questions.

  2. adam mclane Avatar

    Jason- I think the key is honesty. In most cases suspending COLA or even a raise is really a ministry choice they are making. They are saying that investing in the nursery or vehicles or a landscaping contract while forgoing a contract they entered into with you. In 99% of cases they COULD take care of their staff if they really wanted to, but are short-changing you because they know they can get away with it. I think calling a spade a spade is really the only option out there. At the end of the day, you have to decide if the income you receive is enough for the labor you provide. (Since most ministry staff are independent contractors of the church, filing as self-employed persons.) If they cannot meet what you need to survive long term, it’s best to get on the horse and ride off into the sunset IMO.

  3. Anonymous Avatar

    This is good stuff, but not sure how practical. In THIS economy I don’t know how well leadership is going to be willing to listen to staff complaining about not getting paid enough.

    I took a $3K pay cut this year because our overstaffed church chose to not eliminate jobs and instead, cut benefits. Only not everyone was effected. Myself and one other guy were the only ones that got hit this bad. And NO ONE got a COLA. I would have been thankful for a DIET cola!

    And as frustrated as I am, I am glad to have a job. I’m glad no one lost theirs. But I have yet to serve a church that was serious about taking care of thier youth pastor.

    Again, I am glad to have a job. Glad to have benefits. And I have friends that are really struggling and they would be MORE than glad to have my job and my pay, even with the lack of COLA and the cut in bennies.

    So I live in this tension of feeling undervalued, but grateful in this economy to have steady pay. Of course that doesn’t mean that I’m not looking. Me and it looks like a LOT of youth pastors. (Maybe your next series should be about finding a job! ;^) )

    Thanks adam. Sorry for the rant and thanks for the topic.

  4. Ben Avatar

    Thanks for the post – I am 27 and been in the ministry for 3 years and this is the first time I have even heard the term COLA.

  5. […] Youth Ministry Salaries – Adam McLane posts the third part in his series on personal finance for youth ministers. Some great ideas here. […]

  6. youth ministry Avatar

    Every should know about cola-cost of living is essential.

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