Friday, October 29, 2010

Back to Basics

B and I have made the decision to go back to the beginning of our financial journey and start again so we can save to pay cash for farm land.  We have built our budget around the survival plan and are even going to use envelopes again.

This is something we want very badly and are taking the necessary steps to help us stay focused.  It's always nice to have a goal.

Tuesday, October 19, 2010

Bankruptcy and The Crystal Cathedral - Pathetic or Prophetic?

The Crystal Cathedral has filed for bankruptcy.  I have no doubt that critics, skeptics and naysayers are smirking in their cheerios this morning.  My heart aches.  My hypotheses and philosophies of the future of Church finances have been supported by this event, but I find no pleasure in it.

Please, let me explain.  First, I love Robert Schuller.  In the early years of my time in full time ministry, his book, “Your Church Has Real Possibilities” was very influential in helping me form practical direction for British Isle Evangelism.  I have been to the Crystal Cathedral a couple of time and thoroughly enjoyed the experience.  I’ve never been a big fan of “The Hour of Power” and believe it has painted a terribly incomplete picture of the ministry of Robert Schuller and life of the congregation there in Garden Grove.
Despite my fondness for Robert Schuller, I do have some rather strong doctrinal variances from him.  It is not, however, doctrinal, but practical and financial weaknesses that have brought this crisis upon the Crystal Cathedral.

All living organisms reach maturity, then age and die.  A local congregation is not exempt.  Even a mega Church will eventually experience the phenomenon.  The death may be slow, even very slow, but eventually, regress happens.  

Real estate (at least the buildings), are subject to the laws of science (eg. Thermodynamics).  Buildings, parking lots, fixtures, and the like, wear out, atrophy, eventually to the point that repair is no longer viable.  Restoration or replacement can be extremely expensive. The Crystal Cathedral was once the cutting edge of Sacred Architecture, now it is a dated, aging monument to days gone by.

Even great ministries and their campuses reach a plateau.  Some, especially those which are legacies to a single man’s (or woman’s) vision, are likely to survive little more than the lifespan of the founder.  Those with the vision and savvy to create a succession plan, will live, and can even prosper for generations.  But, time and circumstance happen to us all.

The churches that last the longest continue to morph and reinvent themselves by moving campuses, changing formats and maintain a certain balance between longevity and turnover of staff.  Some even change their names as a part of the metamorphosis. 
I have nothing against those things, but I submit that those changes may actually mean that a new congregation has been birthed rather than a simple location change.  Some of the core may be the same, but the differences are significant enough to suggest the organization is different.

Churches are also subject to the laws of economics.   When we spend less than we earn, when we avoid debt, when we budget wisely , give generously and when we save appropriately, with an eye to the future, we prosper.  When we run up debt, spend ahead of our income, expand too quickly and have no financial cushion, we risk much.

Our current economic crisis in America (and the world), has highlighted a fundamental crack in the traditional financial thinking of many congregations.  A large number of ‘boom’ Churches are in serious financial trouble.  As the communities around them blossomed under the economic and housing bubble of the 90s and early 00s, congregations grew and expanded.  Following the example of their members, large numbers of Churches built McMansions in the suburbs.  Using easy credit, they took out huge mortgages and built oases of peace and faith that were reverent and (often) simultaneously flamboyant.

These relocated congregations frequently experienced a huge burst of activity and growth when they moved into their new facilities and added staff and ministries accordingly.  We justified our extravagance by pointing to “God’s blessings” and our noble purpose.  We convinced ourselves that we were “casting our bread upon the waters”.  Oh, what a grand time it was.

Then, like the children’s chorus, “the rains came down and the floods came up”.  The American economy collapsed.  The bubbles burst and all Hell broke loose.  Businesses closed or laid off employees by the train load, unemployment exploded, banks failed, the stock market crashed, the housing market melted, money vanished. 

Amidst the rubble of foreclosed homes, unemployment lines and broken dreams, we see church after church struggling to stay afloat.  Offerings in many places have dropped by nearly half.  Attendance has taken a hit in those places where families are being forced to leave in order to find work elsewhere.

It is a bleak reality, where once thriving Churches are faced with cutting staff and programs.  Churches born with the best of intentions and the most Holy of goals, are finding themselves struggling, or unable, to pay their mortgages.  Banks don’t want to foreclose of places of worship.  That’s not good PR.  Despite the efforts of everyone involved, both borrower and lender, Churches are defaulting on loans at a record pace.  The Crystal Cathedral is simply the most high profile example to date.

The future requires a paradigm shift, a radical change in the way churches operate financially.  I pray daily that we awaken and make the necessary changes before it’s too late to do so.

For Churches that are in financial crisis, it is imperative that we begin immediately to budget like a family rather than like a corporation.  Most congregations may be structured like a business, but we function like a household.  We would be better off to budget that way. 
On a high level, that means:
1.       Repent
2.       Pray
3.       Stop borrowing.
4.       Establish a perimeter (it looks a little different than for a household, but essentially the same)
5.       Create a Budget (a zero based budget)
6.       Develop a baseline emergency fund
7.       Eliminate Debt
8.       Have a fully funded emergency fund
9.       Pray

There will be some tough, heartbreaking decisions in the process.  It may mean some salary reductions.  It may mean some staff cuts.  It will most likely require the cutting of some ministries and services the congregation provides.  It may mean selling the building or some of the land (if you can find a buyer).  It will certainly mean scaling back on opulence.  

Budget cuts do not have to mean quality cuts.  It is better to do a few things well, than offer many things poorly done.  

Restructuring will not be fun.  It will not be easy.  Feeling will be hurt and some may even leave over it.  If that happens, so be it.  We have to do the right thing, regardless of the consequences.

I’m going to interject a very personal frustration here.  Typically, one of the first cuts congregations make in times of financial difficulty is to the Missions budget.  I find that both bizarre and counterproductive.  Our prime directive is to disciple the world.  If the first financial cutbacks we make are related to evangelism, then we really have some mixed up priorities.  

A better way might be something like this (it’s only an example):  We say we have to cut 10% across the board.  After cutting all the fat we can find, we ask the staff to take a 10% cut and we share our situation with our mission partners and explain that we are doing the same with our off campus staff.  We let them know that as soon as the crisis is over, we will return to our normal level of giving.  

Let me spend a moment offering my unsolicited and unwelcome advice to recent or future Church plants: Don’t do debt!  The economic landscape has changed, maybe forever.  The tectonic plates of our financial basis have shifted.  The Church is not in the real estate business.  I urge you to stay in rented or borrowed facilities either permanently or at least until you have cash to purchase. 

If you feel you must take out a mortgage, only ever do so on your first structure, and absolutely NEVER of future expansions.  Did I say NEVER?  Good.  Build the minimum that you can get away with.  Make sure that your mortgage can be paid with the current income, and do not rely on any projected future income that will come from wished for growth.  

Make absolutely sure you use a zero based budget.  Each ministry, each service, each program, must justify its existence.  Do not expand in either staffing or campus until there is cash flow to do so.

Focus on ministry rather than facility.  The Great Commission says, “GO!” It says nothing about “Invite”.  We can be more effective and more involved if we take our work to the hurting rather than finding a way to get the hurting to us.  I think of ministry more like ‘search and rescue’ than an emergency room where the wounded are carried.  I’m all for emergency rooms, I just think a pro active role is more Biblical.

I intend to flesh these thoughts out in a future book (working title, “Paradigm Shift: a Quest for Revival, Reformation and Revolution in the Church”), but for now, I hope this rant get you thinking. 

I am cross posting this in “Recession Proof Living” and in “Paradigm Shift”.

Saturday, October 16, 2010

Freeze on Reposession - Sounds Compassionate, but is Bad Business

We're all pretty much aware that home foreclosures are at an all time high and the number just keeps on growing.  You may even have followed the story of the family in Denmark, ME who refused to pay their mortgage for years, but had the foreclosure fail because of shoddy paperwork by the bank.

As that story unfolded, the world discovered that the subprime loan debacle was not the only skeleton in the closet of the embattled mortgage industry.  We have learned of falsified signatures, 'robo' signers, clerical errors, and more.  The banking world has given itself another black eye.  I've even heard stories of people who were current (and always had been) on their loans, being foreclosed on!

Now we have another mess at just the time we need some stability.  What we don't need is a knee jerk reaction that cripples the already wounded housing industry.  But what we're getting is a knee jerk reaction.  Go figure.

There is talk of a moratorium on foreclosures and some lenders have enacted voluntary freezes.  On the surface, that sounds compassionate and responsible.  In reality, it has the potential of hurting everyone who is trying to sell a house or even buy one.  Here's why I think so.

First, if I'm a title insurance company, I am much less likely to risk underwriting anything.  No title insurance, no mortgage.

Secondly, if I'm a lender, what motive do I have to loan money?  If there is no guarantee and I must bear all the risk, I have no incentive to put my money out on the table. 

If I'm a homeowner, I'm tempted to to say, "Hey, why should I pay my mortgage?  The guy down the road hasn't paid his in 2 years and nothing has happened, why am I being punished for being responsible?"

If I'm trying to sell my house, I'm stuck because even if someone wants to buy my house, the buyer's trouble in finding title insurance or a willing lender may kill the deal.

There is no excuse for the shoddy business practices that have led to this mess.  The perpetrators should be uncovered and dealt with accordingly.  But let's not damage our economy more, by over reacting.  In my opinion, the suggested moratorium is a political move rather than a financially sound one.  Deal with each case, each mortgage and each lender on an individual basis.  Grant assistance where assistance is required.  Dole out justice where justice is required.  Repossess where appropriate, and fine or close up those businesses who have done wrong.  But don't, please don't, risk us all.

Monday, October 11, 2010

The Fed is Making Me Nervous.....AGAIN!

I'm not an economist.  I don't want to be one and I don't play one on T.V.  I'm just a guy who wants to live on less than I earn, avoid debt, build enough wealth so that I don't have to worry about economic down turns and upticks and help others do the same.

Like I said, I'm not an economist, but as I watch our Federal Government and the Federal Reserve pile bad decision upon bad decision, I grow concerned that sound economics is an endangered category.  I read this morning that the Fed is considering printing more money, with the intent of driving down the dollar and driving up inflation.

To my simple Hillbilly mind, that sends the wrong message.  First, driving prices UP via inflation just before the Holidays, in a time of high unemployment, does not indicate a concern for the welfare of the average American.  The focus appears to me to be on foreign investment, by making it less expensive to invest in America;  kind of like a big sale.

Perhaps it will work, but it's just as likely to make foreign investors run for the hills.  It will not spur borrowing, which is another desired outcome.  As long as people remain out of work at a near 10% level, we are not going to see the spending that the Fed keeps wishing for.  Creating inflation will not do that, either, though it may ward off deflation.

It seems to me that we should look to ourselves, rather than to the outside to solve our economic uncertainties.  Lower taxes, cut spending and let the markets take care of themselves.

For the average individual or family, the way to face the future is increasingly clear; eliminate debt FAST, put God first, live on less than you earn, grow and emergency fund of 1 year of living expenses, store up one year of staples, save at least 10% and slowly increase that to 20%.  Everyone who works this plan for the next 7 years will find themselves secure against whatever the future holds.  I am convinced of it.