4 Reasons Why Every Church Budget Should Include a Capital Reserve Line Item
In personal finances, we all know how important it is to have an emergency fund. Unforeseen, costly events happen. Sometimes they are relatively small—a tire goes flat or a washing machines stops working. Sometimes they are big—a job is lost. Having money set aside for these purposes is key to financial health.
But what about churches?
Churches face a similar predicament that, we as individuals, face.
Capital reserves are funds set aside, specifically for facility improvements or repairs. And sufficient funds set aside for these improvement or repairs are the result of very intentional planning.
To start setting aside funds for future capital needs, church budgets must include a line item dedicated to accomplishing this goal.
Here are a few reasons why every church budget should include a capital reserve line item:
1. Church facilities tend to get older, not younger.
This may surprise you, but your church facilities will not improve on their own. Unfortunately, many churches budget as if their facilities will never deteriorate, that they air conditioning unit will work forever. Capital reserves line items acknowledges reality—facilities get worse over time, not better.
This may surprise you, but your church facilities will not improve on their own.
2. You never know when a major capital expense will hit.
Our best plans fail, even for capital repairs. Many church facility problems come as a complete surprise. You didn’t anticipate the roof leaking that day. You thought you had, at least, another year on your air conditioning unit. But here you sit, in a hot, leaking church building. A capital reserves line item helps ensure you have money set aside for unfortunate surprises.
3. Capital reserves will increase confidence and decrease stress.
Capital reserves increase you and your church members’ confidence that the budget will not be derailed by a major facility expense. Capital reserves also decreases the stress that comes from knowing you are not prepared to withstand an unforeseen capital expense.
4. The absence of capital reserves will cannibalize ministry funds.
When expenses must be reduced because of a unforeseen capital expense, it the ministry budgets that typically take the largest hit. This happens because ministry budgets are typically not seen as a fixed cost. Variable expenses, like ministry dollars, are almost always reduced before a church’s fixed costs.
Churches need funds set aside for capital expenses. Some of these expenses are anticipated, while other come as a complete surprise. To start saving money for inevitable repairs and improvements, make sure to include a capital reserve line item in your budget.