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If You Understand Inflation You Can Protect Your Church

understand inflation

We find ourselves leading in an environment of increasing inflation. Although in the local church world, we may not see its impact right away, it is going to affect your church and mine. Does your church leadership understand inflation? Just when you thought the word “unprecedented” couldn’t possibly be used any more, we continue to climb into levels of inflation that haven’t been seen in over four decades.

In fact, the last time we saw inflation this high, the world was a completely different place.

  • Bread had soared to the cost of 50 cents a loaf.
  • Late-night TV was ruled by Johnny Carson.
  • A newfangled invention called the modem was just released for personal computers (which had barely taken off).
  • Ted Turner had just launched a TV station that broadcasted news 24 hours a day called the Cable News Network (“that’ll never work!”).

Small business owners in your church are no doubt trying to puzzle out how to increase the fees that they charge for the services or goods they provide to combat inflation as it continues to rise. In a recent study by the US Labor Department, inflation had peaked at 7%, which is something that you and I need to take note of as leaders in this environment. [ref]

Understand Inflation and the Difference It Makes

Put most simply, inflation erodes an entire country’s spending power. As inflation continues to rise, the cost of goods continues to increase, and salaries try to match those levels. The entire country has a more and more difficult time purchasing goods with existing resources.

This was one of those financial earmarks that we were watching carefully at the end of 2021. In fact, most economists were advising waiting while we got through the Christmas season to see what would happen in the new year. But alas, inflation is continuing to rise. Our churches need to think carefully about how we react to this as we plan for our ministry for the rest of this year and beyond.

Here are a few articles to dig deeper into in order to understand inflation:

This article really isn’t financial advice for your church. I would suggest that you need to secure solid financial advice from trusted individuals as you think about how to position your church financially for the future. What I want to talk about here is a series of things that we can do as leaders to understand inflation and help guard our churches from the impact of inflation in the coming year. You may hear such financial advice from your advisors as:

  • Borrow now with interest rates at an all-time low. These are bound to go up, and now’s a good time to lock in rates.
  • Refinance your mortgage. If you’re carrying any long-term debt, now might be a perfect time to either pay some of it off with the cash you have on hand or refinance for the future.
  • Plan for a 25% wage increase. Although your wages are not likely to jump that high, it is a good to consider what would happen if the cost of your staffing were to jump by 25% overnight.
  • Lock in long-term pricing. Now would be a good time to renegotiate every contract that you have to secure long-term pricing at today’s lower rates.

While this isn’t financial advice, the following leadership options could help your church as you deal with inflation in the coming weeks and months.

If You Understand Inflation Here are 4 Steps to Take NOW.

When we talk about a leadership hedge, we’re referring to a protective move that you could do as a leadership team now to ensure that your church is prepared to understand inflation in the coming year. It’s about positioning your team and community to weather the storm of increasing fees and costs of doing what we do over the next 18 to 24 months.

1. Proactive Fundraising Plan

At its very core, inflation is about increasing the cost of services. The cost of “doing business” is going to be higher a year from now.

If we don’t continue to increase the amount of revenue that is coming in per individual giver, we could be caught in this gap with the costs of “doing business” increasing without the same happening to the revenue from our church.

What would it take to see a 7%–15% increase in revenue this year on a per giver basis?

This considers the total number of givers as well as the revenue per individual giver. It could include actions such as an active appreciation plan, where you reach out and ensure that people are clear on how thankful you are for your giving, or a year-end campaign—oftentimes, churches see a significant bump of anywhere between 10% to 15% in the last 45 days of the year. It might even include a plan to convert occasional givers into regular givers. For example, we all know that converting people to online giving is key to the financial health of our organizations going forward.

2. Explore New & Novel Investing Strategies

Over the last two years is that many churches have increased their cash positions. As we went into the pandemic, we became more fiscally conservative and wanted to increase the total number of “weeks” of reserve funds that we had on hand in case of an emergency.

Many churches grew their cash on hand in a matter of weeks or months of an emergency stopgap. The problem with that is that the cash that we’re holding is slowly devaluing if it’s not returning at least 7% interest, which is not the case in a simple bank account. That cash is losing value, and unless we look carefully at how we’re investing it a year from now, the money that we’ve saved up over the last two years could be eroded significantly as the cost of what we do increases.