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Presenting Our Brand New Minister Housing Allowance Calculator!

by Monday, May 13, 2019
Picture of Pastor's Wallet minister housing allowance calculator with blog post title: Presenting Our Brand New Minister Housing Allowance Calculator!

I recently had a friend run some reports on my website to see how people are finding me. One of the most popular things that people search for, I learned, is “minister housing allowance calculator.” Now, I’ve written a lot about the clergy housing allowance, how to take one in retirement, what to do if you take too much, and things like that.

But people weren’t looking for articles about the minister housing allowance. They were looking for a calculator. They were saying, “C’mon, Amy, don’t just tell me how to do it. Give me the tools to actually do it!”

And I’m so obedient that I did just that. You asked for it, and now you have it:

The Pastor’s Wallet Housing Allowance Calculator

You can follow that link to try it out or just click on it from the menu at the top of this website.

How To Use The Minister Housing Allowance Calculator

It’s pretty easy to use. There are a bunch of categories of expenses that are covered under the pastoral housing allowance. All you have to do is input how much each category costs for you. Not every category will apply, so just use the ones that fit your situation. This is what it looks like:


Picture of beginning of Pastor's Wallet minister housing allowance calculator.

For example, if you live in a parsonage, you won’t have anything to put into the Mortgage Payment or Rent categories. If you do live in a parsonage, only add in the expenses that you pay yourself. If your church pays your water bill, you can’t claim that as a part of your cash housing allowance.

At the bottom, there will be a total that shows your anticipated housing expenses for the year. It’s pretty hard to anticipate everything exactly and claiming too small of a housing allowance can lead you to pay taxes unnecessarily. So, it is commonly recommended to request about 10% more than your expected expenses to cover surprise expenses. The Pastor’s Wallet Minister Housing Allowance Calculator calculates that for you too.

Picture of end of Pastor's Wallet minister housing allowance calculator.

Minister Housing Allowance Limitations

This calculator helps you calculate your housing expenses for the year. However, you may not be able to claim the whole amount as a clergy housing allowance. It is important to remember that the housing allowance is limited to the least of:

  • the amount actually used to provide or rent a home;
  • the fair market rental value of the home (including furnishings, utilities, garage, etc.);
  • the amount officially designated (in advance of payment) as a housing allowance; or
  • an amount which represents reasonable pay for your services.

So, before requesting your housing allowance based on your anticipated expenses, you need to figure out if they are lower or higher than the fair market rental value of your home. You can read all about how to do that here.

Then, once you figure out how much you can claim you need to get it officially designated. If your church doesn’t have it in writing somewhere that you’re getting a housing allowance, then you’re not getting one. Everything they give you will be considered taxable income. Do your calculations and then make sure your church makes it official.

Try out the calculator and let me know what you think. I hope you find it helpful!

Is there anything else you wish I had on this website? Let me know in the comments or by emailing amy@pastorswallet.com.

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Do You Know What Your Spouse Thinks About These Key Financial Topics?

by Monday, May 6, 2019
Picture of a couple laying in the grass holding hands with blog post title: Do You Know What Your Spouse Thinks About These Key Financial Topics?

While premarital counseling addresses a lot of expectations that we enter marriage with, anyone who has been married for over a day knows that there is no end to the surprises of how our spouse sees things. There are so many things in life that we take for granted and don’t even realize there is another way of viewing them. Until we get married.

Personal finance is a typical area for this. Usually, we assume that the way we grew up is normal. The way our family did things and viewed things is how everyone does. But that’s simply not true.

There are a lot of areas where spouses can have different opinions without ever realizing it. Unfortunately, those differences usually wait to reveal themselves in the heat of the moment when emotions are high and a decision has to be made.

Save yourself some trouble and have these discussions now, while you still have time to ponder each others’ point of view and come to a mutual understanding. Remember, most of these topics don’t have a right or wrong answer, rather they are a matter of personal experience and values.

Have you and your spouse discussed:

Do You Tithe On Net Or Gross Income?

I’m putting this question out there first because I think it’s the easiest one. There are only two options and if you’re a pastor, I hope you’ve discussed this already.

But you can take it beyond net or gross income: Where should your tithe go? Does it go to the local church you attend or to any ministry you believe in? Is it required or optional? Do you feel led to give beyond the tithe? Where will that money go? How will you determine how much to give?

Will Your Kids Be Expected To Work While In School?

Kids should be kids and not have to worry about jobs or adult responsibilities. It’s important for kids to get a job and carry their weight. They need to build a work ethic. If I can afford what they need, why would they work when they should be focusing their time on their studies?

There are a lot of different opinions and views on kids working while in high school and college. The only opinion that really matters in your case is your spouse’s. Don’t worry about what your friends, parents, or even kids think. You and your spouse need to come to an agreement and everyone else can just live with the consequences.

You should actually start this discussion long before your kids are old enough to hold a real job. Will your kids be expected to do chores? At what age? Will they be paid for them? If they receive an allowance will it be tied to work being done or not? When your kids are old enough to drive, who will pay for the car, gas, and insurance? What about school or missions trips? What luxuries are you willing to provide for them and what are they responsible for?

Whose Responsibility Is It To Pay For College?

“Doesn’t your dad have to pay for college?” I still remember a friend’s innocent question when I said I’d be attending a community college for lack of funds. She didn’t understand the concept that some dads simply don’t have money to pay for college. Your view on this will have a lot to do with how you were raised and what your parents did for you.

Personally, I’d like to help but I’m not going into debt or sacrificing my retirement for my kids’ education. As they say, you can take out loans for college but not retirement. My kids are just as capable of working their way through school as I was.

But that’s just my own personal opinion and value. For you, it might be different and that’s okay. Just make sure you and your spouse agree. Will you help your kids pay for college? How much help are you willing to offer? Are you willing to take out loans or co-sign for them? Is your assistance unconditional or do you expect them to maintain a certain GPA or lifestyle? How many years or what level of degree are you willing to help with? What happens if one kid goes to college and another doesn’t?

Will You Quit Working At Age 65 For A Traditional Retirement?

While a complete cessation of work is still the common view of retirement, things are changing. Many people believe God created us to work and we should keep doing so as long as possible, even if only part-time. Others dream of “retiring” early in order to explore the world or a different career path. If your wife is planning on spending her golden years doting on grandchildren while you feel called to the mission field, it’s best to have that discussion now.

Are Your Retirement Savings For Your Consumption Or To Leave An Inheritance?

Proverbs 13:22 says, “A good person leaves an inheritance for their children’s children.” How important is that to you? How much “lifestyle” are you willing to sacrifice in order to have something left over for your heirs? Is it more important to travel and spend time with your family or leave them an inheritance?

As with most things, there isn’t a black-and-white one-or-the-other answer. There’s a spectrum that ranges from “I earned it and I’m going to spend every last cent” to “I’m going to live as cheaply as possible in order to leave a big inheritance.” Most people fall somewhere in the middle and you have to choose a place where both you and your spouse are comfortable to land.

How To Discuss These Topics

While you’ve probably already discussed some of these topics, chances are there are some that require a little bit more consideration. Maybe you discussed parenting before having kids, but now that you’re in the thick of it you realize that you had no idea what you were talking about before. Or, maybe your retirement dreams have changed over the decades and it’s time to reassess each others’ goals.

The two most important things to remember for these discussions is that there’s no one right answer and nothing has to be decided in one sitting. Start the dialogue and then pause it to give each other time to consider the other person’s views and pray about it. You might wait a week or even a month to pick up the topic again.

Make sure you understand the why behind your spouse’s opinions. If you’re having trouble agreeing on something, you may discover that your hearts are in the same place and it’s just the implementation that you disagree on. If you take the time to understand why your spouse feels the way they do then you will be more compassionate and better able to reach an acceptable compromise.

And remember not to take a difference of opinion personally. Just because your spouse doesn’t see something the way you do doesn’t mean they think you’re wrong, bad, ignorant, etc. Everyone sees the world through different eyes. Your spouse’s views likely have nothing to do with you.

Finally, pray. That may sound pretty basic, but don’t forget to pray about it. For all you know, God has a different opinion than both you and your spouse and he wants a say in the discussion!

How about you? What are other important financial topics that you think married couples need to discuss? What are your suggestions for having healthy and constructive conversations? Share with us in the comments!

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How To Set Up A Church Accountable Plan To Reimburse Ministry Expenses

by Monday, April 29, 2019
Picture of a hand with a pen writing out plans with blog post title: How To Set Up A Church Accountable Plan To Reimburse Ministry Expenses

Last week we discussed the value of an accountable reimbursement plan for churches now that pastors can no longer deduct their unreimbursed business expenses. Today, I will tell you how to actually set one up.

What Makes A Reimbursement Plan Accountable

The confusing thing about accountable plans is that you don’t need to file any forms or get any kind of permission from the IRS. We’re used to needing authorization for things, like Form 4361, so we get nervous when we don’t have the IRS’s official stamp of approval. However, you don’t have to communicate with the IRS about an accountable plan, you just have to follow their rules.

What makes a reimbursement system an accountable plan is that it complies with these three IRS rules:

Expenses Must Be Ministry-Related

The expense that you’re seeking to be reimbursed for must have been incurred while performing services as an employee of your employer (the church). I’m calling them ministry expenses here because that’s what they are for pastors and churches, but the IRS calls them business expenses. For our purposes, the words business and ministry are interchangeable.

Basically, any expense that was previously deductible is allowed under an accountable plan. Examples of qualifying expenses are:

  • Ministry use of an automobile: IRS standard mileage rate and parking fees and tolls (miles between the church and home do not count)
  • Convention, conference, seminar, and workshop expenses
  • Ministry travel: lodging, transportation, and meals on overnight trips (receipts are not required for most travel expenses under $75, not including lodging)
  • Continuing education expenses (if it does not qualify you for a new position)
  • Sermon resources and educational material, if church-related
  • Subscriptions, books, internet, and software, if ministry or work-related
  • Office supplies and church gifts
  • Ministry-related legal and professional services
  • Equipment such as computers. Cell phones are only reimbursable for the portion of their use that is ministry-related and require a detailed accounting of ministry versus personal use.
  • Hospitality and entertainment when church-related. Reimbursements can cover the entire cost of meals.


If the church reimburses an employee for expenses that are not ministry-related, then they must be reported in the employee’s wages for income tax purposes and are not deductible.

Expenses Must Be Accounted For In A Timely Manner

Accounting for your expenses means that you have to keep a record of them along with proof like a receipt. It works the same way as if you were deducting them on your personal tax return. You can use a church-provided form, diary, account book, log, statement of expense, or another similar record to document each or your expenses when they occur (or shortly thereafter). Your records should show:

  • Date
  • Place
  • Description of expense
  • Ministry purpose
  • Names or ministry relationship of people involved
  • Dollar amount


In addition to keeping adequate records, they must be submitted to your church in a timely manner. “Timely” is a very subjective word and open to interpretation. The IRS acknowledges that “a reasonable period of time” can vary depending on the facts and circumstances of your situation. However, to be safe, they recommend giving advances within 30 days of the expense incurring and accounting for expenses no more than 60 days after incurred.

Excess Reimbursements Must Be Returned In A Timely Manner

Any advances that are not completely used on qualified expenses or adequately accounted for within a reasonable period of time must be returned to the church. If they are not returned, they will count as taxable income for you.

Again, the IRS offers guidelines for what they consider to be a reasonable period of time. Excess reimbursements must be returned within 120 days after the expense was paid or incurred. Another option is for the church to issue quarterly statements asking employees to return or adequately account for outstanding advances. In those cases, the employee has 120 days after receipt of the statement in which to comply.

How Reimbursements Under An Accountable Plan Are Reported To The IRS And Taxed

Under an accountable plan, reimbursements come out of the church’s funds and not the employee’s salary. The reimbursements are not reported to the IRS as taxable income on Form W-2. And the employee does not need to report them to the IRS either. If the church mistakenly includes them on Form W-2, they should issue a corrected form as soon as possible.

Reimbursements that do not qualify based on the above rules because they are not ministry-related or were not substantiated in a timely manner do qualify as taxable income. These amounts are included in wages on an employee’s Form W-2 and subject to income and payroll taxes.

How To Establish An Accountable Plan

As I mentioned above, there are no specific IRS forms that you need to fill out or get approved to establish an accountable reimbursement plan. Your church simply has to make an official decision that they are going to have one. It doesn’t even require a church vote or anything like that. As long as the church has given their finance committee or executive staff power over budgeted funds, then they can decide to establish an accountable plan and the IRS is okay with it.

Just say the word and you have an accountable plan. Of course, you need to train your employees on how to follow the plan correctly. If they don’t do it right, they will receive no benefit from it. Also, if the committee or staff overseeing the plan wants to place additional requirements on it beyond what the IRS lays out, that is their prerogative. And remember, the accountable plan is open to all employees of the church and not just the pastor or leadership.


I hope you find this article helpful. If you need more detailed information about things like per diem travel reimbursement or other specific situations, you can find it on this IRS web page.

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How Pastors & Church Employees Can Get A Tax Break For Their Unreimbursed Business Expenses

by Monday, April 22, 2019
Picture of a gas station pump with blog post title: How Pastors & Church Employees Can Get A Tax Break For Their Unreimbursed Business Expenses

If you’re like a lot of clergy members, you had an unpleasant surprise this tax season when you learned that you can no longer deduct unreimbursed church business expenses with your itemized deductions. You’re probably used to covering a lot of church expenses yourself, knowing that you’ll get some kind of reward for it come tax time. Except this year it didn’t come.

Why not?

What Happened To The Unreimbursed Business Expense Deduction

Part of the 2017 Tax Cuts & Jobs Act was the elimination of the unreimbursed business expense deduction. The goal was to simplify taxes as much as possible, so a number of deductions were eliminated or changed.

Before 2018, you could deduct unreimbursed business expenses if you itemized your deductions. The deduction amount would be calculated on Form 2106 and then deducted on Schedule A so that you wouldn’t have to pay income taxes on it. That line (line 21) is gone from the new Schedule A.

How To Avoid Paying Taxes On Unreimbursed Church Business Expenses

So, the deduction is gone. What can pastors do? Are you just simply out of luck?

I’m happy to tell you that no, you’re not out of luck. There is another way to avoid paying taxes on the church expenses that you pay for out of pocket.

How? By having your church set up an Accountable Plan.

What Is An Accountable Plan?

An accountable plan is a business expense reimbursement plan that follows IRS rules. With an accountable plan, expenses can be reimbursed without being subject to withholding taxes or W-2 reporting. This is important for pastors because it is one of the only ways (aside from a 403(b) plan) to lower taxable income for Social Security purposes.

If your church reimburses you with a non-accountable plan (meaning it doesn’t follow IRS rules), then that reimbursement is considered part of your compensation, which is taxable. Even if you don’t end up paying income tax on it (because of the housing allowance, deductions, etc.), it is still subject to the 15.3% self-employment taxes (for those who haven’t opted out).

What Church Expenses Qualify?

Accountable plans cover all expenses that are ordinary and necessary. Ordinary means that it is common and acceptable for people in your position. If you are a Methodist minister who wears a robe every Sunday, then cleaning those robes would be an ordinary expense. If you wear ripped jeans when you preach on Sunday, then dry cleaning costs for robes would not be ordinary for you.

A necessary expense is one that is helpful and appropriate for someone in your position. If you live in the Montana countryside, then the gas you use to drive to your parishioners’ homes is a necessary expense. It’s not like you can take the subway or anything.

Also, though it seems obvious, the expenses must be ministry expenses and not personal. Your travel expenses to visit your family for the holidays do not count, even if your brother-in-law really needs Jesus. It’s just not the same as when you travel to visit one of your congregation members in the hospital.

Other Benefits Of Accountable Plans For Churches

Another great thing about accountable plans is that they aren’t just for pastors. Unlike perks like the housing allowance, all church employees can benefit from an accountable plan. That means the children’s ministry coordinator, the church secretary, even the janitor can make use of the plan.

Finally, and this is usually a church’s favorite, they are free! You don’t have to pay a bunch of money to set up or maintain one. Complying with the IRS rules may take a little bit more staff time, but other than that, they’re free. Does it get any better than that?

So, if you regularly pay church expenses out of your own pocket and are mourning the loss of the unreimbursed business expense deduction, cheer up. Have your church set up an accountable plan and you’ll be better off than when you started.

This article explains exactly how to set one up.

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What Is Modern Monetary Theory & Why Should You Care?

by Monday, April 15, 2019
Picture of coins with blog post title: What Is Modern Monetary Theory & Why Should You Care?

As a parent, have you ever seen one of your kids walking down the hallway with a large stick and been forced to ask, “And what are you planning on doing with that?”

You don’t ask because you’re particularly interested in the stick. You ask because that stick is a sign that something is going to happen soon. And you’re going to have to deal with the consequences.

The Growing Popularity Of Modern Monetary Theory

Well, some prominent left-leaning politicians are waving around a new stick these days: Modern Monetary Theory (MMT). The theory is quickly gaining popularity, so it is important for you to be familiar with it, regardless of your political persuasions.

MMT is popular because it allows for seemingly unlimited government spending and deficits without negative consequences. Understandable, right? Don’t we all wish that money grew on trees?

How Modern Monetary Theory Works

Well, according to MMT, money grows on printing presses. Because, well, it does. We create money by printing it.

The theory states that as long as a government prints its own money and issues debt in its own currency, it can spend and take on debt to its heart’s content without worrying about paying it back. There is no need to collect taxes to pay for the debt, you can just print more money.

This is a relief to everyone who is concerned about how our country’s growing debt burden is going to affect future generations. But, is it too good to be true? What’s the downside?

The downside is inflation. You may have learned in Economics class that the risk of printing lots of money is inflation, where the money simply isn’t worth as much anymore. That $10 that used to get you a double Western bacon cheeseburger super-sized meal will only buy you a measly little kid’s burger, and not even a drink to go with it. That’s inflation.

It’s okay for the government because they can print money. But you can’t. High inflation is usually bad for everyday people.

How Modern Monetary Theory Addresses Inflation

And MMT acknowledges that. Instead of seeing taxes and debt as a way for the government to pay for things, MMT sees them as tools to combat inflation.

Prices beginning to inflate because there is too much money in the economy?

Take some money out.

How?

By raising taxes or selling bonds. When we give money to the government by either paying taxes or buying their bonds, it takes that money out of the economic system.

MMT holds a very different perspective on debt and taxes than the traditional view. Usually, when government spending is proposed, we ask, how are we going to pay for it? We want to know what kind of debt or taxes will be required to cover the cost.

Proponents of MMT say that we should instead be asking, how will this affect inflation? We don’t have to worry about how to pay for things (just print the money!), our only real concern should be inflation.

What Does It Mean For The Federal Deficit?

You may be getting suspicious that espousing MMT could lead to greater federal budget deficits. You’re right. In fact, according to MMT, a deficit is a good thing. A $1 trillion deficit is an extra $1 trillion in the economy. As they say, the government’s deficit is the people’s surplus.

Unemployment is seen as evidence that the deficit is too small. MMT strives to find a perfect equilibrium where there are low unemployment and low inflation, regardless of debt or deficits.

What Does This Mean For You?

Why does any of this matter to you?

Well, the politicians promoting this theory are very popular, especially with young people. If you don’t think young people’s trends matter, LOL. Yes, you know what LOL means. And it’s not because you learned it from Merriam-Webster. Young people have more power than any of us old fogeys want to admit.

Now, MMT could easily fizzle out as completely as MySpace and mullets. However, it could also become the “new normal” like the internet and cell phones. Therefore, it is important for you to understand. For all we know, we could be the guinea pigs that get to test it out for the first time in the coming decades. It has yet to be proven, do you think it will work?

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How To Calculate Fair Market Rental Value For The Clergy Housing Allowance

by Monday, April 8, 2019
Picture of a house with a car in front with blog post title:How To Calculate Fair Market Rental Value For The Clergy Housing Allowance

The ministerial housing allowance is the biggest tax benefit available to pastors. It allows you to exclude your housing costs from gross income for your federal income taxes. Thus, all of your housing expenses, from your mortgage payments to your light bulbs, are income tax-free. (You still have to pay self-employment taxes on them, though.)

Ministerial Housing Allowance Limitations

There are nevertheless limits to how much can be excluded with the housing allowance. Your clergy housing allowance is limited to the lesser of:

  • the amount actually used to provide or rent a home;
  • the fair market rental value of the home (including furnishings, utilities, garage, etc.);
  • the amount officially designated (in advance of payment) as a housing allowance; or
  • an amount which represents reasonable pay for your services.


While each of these criteria is important, today we are only going to address the fair market rental value of the home, which is the most difficult of the above to calculate.

Calculating Fair Market Rental Value

The IRS does not spell out how they want it calculated, but there are two different methods that the tax courts have allowed people to use when doing so. The first is the comparable fair rental value and the second is the comparable sales method.

Comparable Fair Rental Value Method

The comparable fair rental value is the most common and should be fairly simple if your home is generic. You simply ask, what would a stranger pay to rent your house with all of your furnishings included? A local real estate agent should be able to tell you this. You can also look at rental listings for comparable homes in the local  newspaper or from a website like craigslist.com.

For the rental value of your furniture, you could simply add a little extra (be realistic!) or consult with a furniture rental company. However, the rental value that the IRS is interested in is that of the furnished home, not the total of the rental value of the house and the rental value of the furnishings as calculated separately.

Also, it is important that you use local comparisons. Housing costs are significantly different in California and Kentucky, so you need to make your calculations based on your specific real estate market.

Comparable Sales Method

The next method you can use to calculate the fair market rental value of your home is the comparable sales method and it has two steps. The first is to figure out how much your house would be worth if you were to sell it. You can talk to a local real estate agent, check public real estate sales records for comparable homes, or consult a website like zillow.com or redfin.com. Remember, those websites give estimates based on local comparisons, so the more unique your house is, the less accurate their estimates will be.

The second part of the comparable sales method requires you to determine the rate of return on an investment that a stranger would require on a similar property. If a real estate investor came and bought your house from you, what rate of return would they need to make it worthwhile for them? That’s called the capitalization rate.

The capitalization rate will vary based on your local real estate market. Again, your best source for this kind of information is a real estate agent experienced in rental properties. In one tax court decision, the judge applied a capitalization rate of 13%. Because of this, 13% is commonly quoted and used for calculating the fair market rental value for housing allowances.

Be aware, however, that the court case was completely unrelated to the housing allowance. The property in question was used for a gas station, which carries significantly higher risks than a home. Therefore, I would caution against using 13% as a rate of return based solely on the aforementioned court case. A knowledgeable real estate agent will be able to tell you if 13% is a reasonable number for your local market.

Once you’ve determined your home’s sales value and a reasonable capitalization rate, multiply them to get the fair market rental value. For instance, if your home is worth $250,000 and your local capitalization rate is 12%, the fair market rental value that you should use for your housing allowance calculations is $30,000.

Bear in mind that these are rental values for your house and furniture. On top of that, a renter would still have to pay utilities just like you do. So, you would add the cost of utilities to the $30,000 calculated above to arrive at your maximum allowable housing allowance.

Record Keeping & Calculation Frequency

It is important to keep a record of the fair market rental value that you calculated and the method that you used. If the IRS audits you, they may require it to ensure that you did not claim an excessive housing allowance. Without records to back up your claims, they may reassess your tax liability and you would owe both back taxes and penalties.

At this point, you may be thinking: These calculations are time-consuming and tedious. Do I really have to do them every single year?

In an ideal world, yes, you would do them every year. However, even the US Tax Court agrees that it’s a pretty big burden to put on pastors. They had initially ruled in a 2000 court case that it would be too much work for pastors to be forced to calculate the fair market rental value of their homes. However, Congress went ahead and changed the law in 2002 to include the fair market rental value in your housing allowance calculations.

If it’s too much for you to calculate every single year, your second best option is to calculate the fair market rental value every few years. In the years that you don’t calculate it exactly, just increase the amount by the rate of increase in rental prices in your area. So, if the fair market rental value of your home was $24,000 in 2017 and rents went up 4% in your area, then $24,960 would be a fair estimate of the fair market rental value for 2018.

Remember, it is not your church’s responsibility to calculate the fair market rental value of your home or parsonage (for SECA purposes). It is YOUR responsibility. You are the one receiving the tax benefit. I hope this guide makes it a little bit easier for you.

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Does It Really Matter If Your Financial Advisor Is A Christian?

by Monday, April 1, 2019
Picture of a person standing under a cross while the sun is setting with blog post title: Does It Really Matter If Your Financial Advisor Is A Christian?
Minneapolis, MN-based virtual Christian fee-only financial planning firm Guide Financial Planning and Christian financial advisor advertisement.

“Then he looked across the table at us, disappointment written all over his face, and said, ‘If only you had worked more…’” The dean of women and a beloved professor at the Bible college I attended was telling us about an encounter she had with her financial advisor. While her children were young, she chose to put her career on hold in order to raise them. Now that they were grown, the financial advisor was telling her and her husband that they were not on track to retire with their peers.

When she told us this story, I wanted to jump out of my seat and tell her, “They aren’t all like that! There are good ones out there!”

It pained me to hear that a financial professional had made her feel like a failure simply because he had a different worldview. She and her husband may not have enough money to stop working today and spend the last decades of their lives on a golf course, but one of her children is a pastor and church planter and the other one is a missionary in Southeast Asia, so I think she made the right decision.

Does Your Financial Advisor’s Religion Matter?

When you think of working with a professional, religion isn’t usually the first thing that comes to mind. It’s not like dating and marriage. So what if your dentist has a different worldview than you do. Does that mean she doesn’t clean your teeth as well? Not really.

Atheist plumbers can unclog toilets and Jewish lawyers can write good wills, so why would financial professionals be any different? The difference is in worldview and priorities. I think it’s safe to say that people of all faiths believe that toilets should flush rather than overflow. And people of all different religious backgrounds agree that legal documents should be written in accordance with the law.

But finances are different. They’re more personal. They’re more subjective. There is a lot more variance as to how people view money and its purpose and management.

Not All Non-Christian Advisors Are Bad

Does that mean that only Christian financial advisors are good? By all means, no. There are many true professionals out there who are able to set their own personal beliefs aside in order to help their clients. There are many who understand that there is much more to life than just accumulating wealth.

Just because someone hasn’t met Jesus yet doesn’t mean they can’t help you be a better steward of your money. Who knows, maybe God has paired you with them so that you can be a light in their world. Just because a financial advisor is not a Christian doesn’t mean you can’t have a fruitful and successful relationship with them.

Not All Christian Advisors Are Good

In much the same way, just because an advisor professes to be a Christian does not mean that he shares your worldview or has your best interest in mind. Many advisors use their religion as nothing more than a marketing tool.

Christians often trust other Christians. Some unscrupulous people take advantage of that fact. And it doesn’t just happen in the finance industry, it happens everywhere. You should never hire someone just because they profess to be a Christian or have a fish on their business card. You need to practice discernment and be wise.

The Difference In Working With Someone Who Shares Your Belief System

Working with a financial professional who truly understands Biblical stewardship and shares your heart for God’s Kingdom can make a world of difference, though. Recently, I’ve gotten to witness this firsthand. Since my goal is to become a financial advisor, this spring I started apprenticing with one in order to get some hands-on education.

Seeing how true faith and finance can intersect has been an eye-opening experience. Whereas most financial advisors start out with questions like At what age do you want to be able to retire? and How much money do you want to accumulate?, this guy starts with What does stewardship mean to you? Sounds to me a lot more like a pastor than an investment advisor chasing returns. Because that’s how it’s supposed to be.

A financial advisor should basically be a pastor for the financial side of your life. They should be there to help you think through your options, articulate your dreams and goals, and then come up with a plan to finance them. That’s much easier done with someone who shares your value system and understands your worldview.

In one of my financial planning textbooks, it talks about budgeting and cash flow planning. It discusses the difference between fixed expenses that you’re committed to paying, like a car payment or groceries, and discretionary expenses that are optional, like eating out or cable TV. The book states, “Some clients who tithe may initially consider monthly gifts in the fixed column. Advisors should consider encouraging clients to classify gifting (including tithing) as a variable expense.”

When I read that my blood started to boil. Financial planning students are being taught to pressure their clients to dismiss Biblical stewardship in favor of a Godless approach to money management.

If you’ve worked with someone who has pressured you to compromise your values or who has made you feel inferior for your choices, I want you to know that you don’t have to. Financial advisors who espouse Biblical stewardship do exist.

How To Find A Christian Financial Advisor

Growing up in a tiny church, I never knew any Christians my own age. When I visited the Bible college for the first time and saw a bunch of my peers passionately worshiping God I had an epiphany. Oh, wow, they really do exist!  

I’d like to give you the same epiphany regarding financial advisors. They aren’t all out there pushing products to pad their own pockets. Biblically wise financial counsel does exist.

If you’re interested in finding a Christian advisor, look first on the Christian Financial Advisors Network. You can also search for one on the Kingdom Advisors website or search for a Christian advisor on the XY Planning Network website. You’ll be amazed at the difference it makes when you’re equally yoked.

I am not affiliated with Christian Financial Advisors Network, Kingdom Advisors, or XY Planning Network and receive no benefit for recommending them. I just know some of their advisors and think you would benefit from knowing them too!

Minneapolis, MN-based virtual Christian fee-only financial planning firm Guide Financial Planning and Christian financial advisor advertisement.
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What Is The Difference Between Seminary Loans And Undergraduate Student Loans?

by Monday, March 25, 2019
Picture of a woman graduating from college with blog post title: What Is The Difference Between Seminary Loans And Undergraduate Student Loans?

A student loan is a student loan, right? Well, not really. There are a lot of different kinds of student loans; subsidized, unsubsidized, undergraduate, graduate, federal, private, parent, etc.

Each type of loan has unique features, both advantages and disadvantages, so it’s important to understand the differences. Many seminary students take out loans not realizing that they are any different than their undergraduate loans. That can be a costly mistake. So, today we are going to discuss the difference between graduate (what you use for seminary) and undergraduate student loans.

The Government Treats You Like An Adult

When you filled out the FAFSA to apply for government aid for your undergraduate degree, you had to include all of your parents’ financial information. Even if you’re living on your own and supporting yourself, the government sees everyone below a certain age as a dependent.

Now that you’re old enough to go to seminary, the government is ready to treat you as an adult. You don’t have to include your parents’ information when you fill out the FAFSA for graduate school. One advantage of this is that it makes it quicker and easier to apply.

There Isn’t Need-Based Aid

You may think that not including your parents’ information on the FAFSA will improve your chances of getting need-based financial aid. Unfortunately, there isn’t much of that available for graduate students.

Pell grants, which are gifts that do not have to be paid back, are not usually available for graduate students the way they are for undergraduates. So, even if the government helped you pay for your undergraduate degree, don’t expect the same help this time around.

Seminary Loans Have Higher Interest Rates

I was just listening to a podcast for financial advisors about student loans. One of the student loan specialists (yes, they do exist) said something that, frankly, shocked me. She said that grad plus loans are a cash cow for the US government. Cash cow is a business term for something that earns you a lot of money with very little effort.

I always thought the government was in the student loan business to help people get an education. Apparently, though, they make a lot of money off of it. The student loan experts were saying that graduate loans have much higher rates so that they can subsidize the undergraduate loans.

For this school year that we’re about to wrap up, the rate for undergraduate federal loans was 5.05% while the rate for Direct PLUS loans for graduates was 7.6%. If you borrow $10,000 and pay it back over a 10-year schedule, that is a difference of $1,550 dollars in interest. The graduate student pays over one and a half times as much interest as the undergraduate student.

Interest Starts Accruing Immediately

Not only do you pay more interest for your seminary loans than undergraduate loans, but the interest starts accruing immediately. If you had subsidized government loans for your undergraduate studies, then they didn’t start accruing interest until you graduated and started to pay them back.

That’s not the case for seminary loans. The government does not offer subsidized loans for graduate school. That means interest starts accruing the moment you take out the loans, no matter how long you stay in school. If you were to borrow $10,000 at the current PLUS loan rates, in 3 years when you finally have your MDiv your loan balance will have ballooned to $12,457. That’s almost 25% more than you originally borrowed.

Should You Take Out Loans For Seminary?

You see, there are some very important differences between student loans for graduate and undergraduate studies. Even though you can borrow more for seminary, it will also cost you more.

If you’ve already gone through seminary and are struggling to pay off your loans, I hope this helps you understand why your balances have grown larger than you expected. If you’re planning on starting seminary in the fall and considering taking out loans, I hope you consider this information very seriously.

No one blinks an eye at someone taking out $50,000 in student loans to go to medical school. The minute that person graduates they’ll be earning at least three times that amount, often even more.

The 2018 salary poll of the Southern Baptist Convention found that full-time senior pastors age 35 and below earn an average of less than $60,000. Full-time ministerial staff of the same age earns an average of less than $50,000. Those are averages, not minimums. Also, that is just the Southern Baptists. Your denomination may pay more or less.

It is important for you to consider how it will affect your life, family, and ministry before you take out seminary loans. Will you be able to follow your call to church planting or the mission field with debt hanging around your neck? Will you feel pressured to postpone having children so your wife can keep working longer to help pay down the balances? What happens if you can’t find a church that will pay you enough to meet your obligations?

Personally, I’m not a fan of debt. I would rather go to a cheaper school or go part-time so that I could pay as I go instead of taking out loans. However, this is your life and your decision. I only ask that you think through your options and consider the consequences of each, and I hope this information helps you do just that.

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Seventh Circuit Court Of Appeals Rules Clergy Housing Allowance To Be Constitutional

by Tuesday, March 19, 2019
Picture of a gavel with blog post title: Seventh Circuit Court Of Appeals Rules Clergy Housing Allowance To Be Constitutional

Though it took five months, the Seventh Circuit Court of Appeals has finally ruled in favor of the clergy cash rental housing allowance (the parsonage allowance was not at issue), declaring it to be constitutional. Here at Pastor’s Wallet, we have been following this story for over a year.

Background

The drama actually began back in 2013 when the leaders of the Freedom from Religion Foundation (FFRF) sued the US government because they believed the ministerial housing allowance to be a violation of the separation of church and state. The judge agreed with them, but it didn’t last long.

An appeals court found that the FFRF lacked standing in the case. Basically, they had no right to sue because they had not been harmed by the clergy housing allowance.

Determined as ever, the FFRF leaders tried to claim a ministerial housing allowance. As expected, they were denied. However, that denial gave them standing to take the issue to court. And so they did.

In October of 2017, the FFRF brought their case back to court and it was tried by the exact same judge. To no one’s surprise, the judge again ruled in favor of the FFRF, declaring the housing allowance to be unconstitutional.

Once again, it was appealed. A three-judge panel of the US Court of Appeals for the Seventh Circuit in Chicago heard the arguments last October, and they have just now issued a ruling. Their decision: the clergy housing allowance does not violate the US constitution.

How The Clergy Housing Allowance Is Constitutional

Our American legal system relies heavily on precedent and case law. That means that not everything is spelled out exactly in our laws. Rather, judges look at previous cases and rulings to guide them on how to decide matters. There were two different Supreme Court cases that they really focused their attention on in coming to a decision regarding whether the cash housing allowance violates the Establishment Clause, or the separation of church and state, as FFRF claimed.

The first case was Lemon v. Kurtzman, which provides three tests to see if something violates the First Amendment’s separation of church and state. The first test is that the law must maintain a secular legislative purpose. The court noted that other non-religious workers also receive employer-provided housing exempt from federal income taxation. Also, the cash allowance is designed to ensure equal treatment among ministers, regardless of where their housing comes from. They found that the way the cash housing allowance is set up in the tax code avoids “excessive entanglement with religion” for the government. The Treasury Department argued that all three of those constitute secular legislative purposes, and the judges agreed.

The second test is that its principal or primary effect cannot advance or inhibit religion. The judges cited a Supreme Court ruling that a tax exemption based on a housing allowance is not a government subsidy. Based on this, the housing allowance passed the second test.

The third test is that the law cannot foster an excessive government entanglement with religion. The Court of Appeals stated that applying housing exemptions to ministers the same way they do for secular employers and employees would, in fact, cause excessive entanglement. The current clergy housing allowance rules do not, and therefore they should remain.

The other past court case addressed is Town of Greece v. Galloway. This case establishes that the Constitution’s separation of church and state must be interpreted by reference to historical significance. The court recognized a lengthy tradition of tax exemptions for religion (even Joseph established one in Egypt back in Genesis!), especially in regard to church-owned property. Such exemptions have never been seen as an establishment of religion and so the appeals judges didn’t see them as such either.  

The Future Of The Clergy Housing Allowance

While this is a great victory for pastors everywhere, it does not mean that the war on the housing allowance is completely over. The FFRF can still take the case to the Supreme Court. Even if they try, though, there is no guarantee that the Supreme Court will hear the case, as they only hear about 1% of the cases presented to them each year.

The FFRF has also indicated that they may lobby members of Congress to repeal the clergy housing allowance. As a counter-measure, you could write to your congressional representatives in support of the housing allowance and encourage your friends and family to do the same.

In light of everything that is going on, this is my advice to you regarding the pastoral housing allowance:

  1. Enjoy it while you have it.
  2. Pray that you can keep it.
  3. Come up with a Plan B in case it all goes away.
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What Kinds Of Student Loans Are Available For Seminary?

by Monday, March 18, 2019
Picture of a seminary student studying on a couch with a textbook and computer with blog post title: What kinds of student loans are available for seminary?

As you look forward to starting seminary in the fall, perhaps the biggest thing on your mind is how in the world am I going to pay for it? If you’re like 69% of college students, you’re probably planning on taking out student loans.

Even if you used loans to pay for your undergraduate degree, things are different once you get your Bachelor’s. Your options have changed. So that you can make an educated decision, here are the loan options available to help you pay for seminary:

Direct Unsubsidized Loans

The federal government offers direct unsubsidized loans to both graduate and undergraduate students. These are not need-based, so all you need is to be enrolled at least part-time in a participating school to qualify.

To apply for these loans, you have to submit the Free Application For Federal Student Aid (FAFSA). The seminary will use the information from the FAFSA to determine how much aid (loans) to award you. The annual limit for direct unsubsidized loans is $20,500 and the aggregate limit, including undergraduate loans, is $138,500.

The current interest rate (until July 1, 2019) for these loans is 6.6% and there is also a 1.062% loan fee. Once you graduate, leave school, or drop below half-time enrollment, you will have a six-month grace period before you have to start paying back your loan. However, interest will accrue while you are in school.

Direct PLUS Loans

If your direct unsubsidized loans are not enough to cover the cost of seminary, you can take out a Direct PLUS loan from the government. These loans do require a credit check. Because of this, you are not guaranteed eligibility, though they are more lenient than most private lenders. Eligibility also includes being enrolled at least half-time.

The borrowing limit is the cost of seminary attendance (as determined by the school) less any other financial aid you have received. So, you should be able to cover all of your costs with a grad PLUS loan. The current interest rate (until July 1, 2019) is 7.6% and there is a 4.248% loan fee. As with the unsubsidized government loan, interest begins accruing immediately. However, you do have a six-month grace period after leaving school before you are required to begin making payments.

Private Loans

While the government loans above have some unique benefits, like flexible repayment options and the potential for loan forgiveness, you may also want to consider private student loans. Private loans are issued directly by banks and credit unions, not the government.

As such, they have different rules for eligibility that may be more flexible than the government rules. Also, some private loans do not have origination fees like the government loans. While direct unsubsidized loans usually have the lowest interest rates, well-qualified borrowers may be able to get lower rates with private loans than PLUS loans.

It’s important to note something that is not on this list- subsidized government loans. Those are the loans that do not accrue interest while you are in school. Unfortunately, those are only available for undergraduate students, so they are not an option for seminary.

Even if you’re very familiar with student loans from your undergraduate days, don’t assume you know everything you need to. Come back next week as we discuss the differences between undergraduate and seminary loans. You owe it to yourself, your family, and your future ministry to make sure you know what you’re getting yourself into before taking out seminary loans.

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