Several weeks ago we discussed the characteristics common to those who are able to build wealth over time. Today, I’m going to introduce you to a real live example of a pastor who has done it.

 

Millionaire pastor. To many, that sounds like an oxymoron. But that’s just what one Pastor’s Wallet reader is. He’s a millionaire pastor. And he doesn’t pastor a megachurch. He hasn’t written any books. He hasn’t written any famous worship songs. And you’ve never seen his face on TV.

 

John’s Story

Meet John. He’s happily married with three kids in college. He pastors a mainline Christian church in the midwest and has been in the ministry for over 30 years. From the outside, he looks just like any other pastor. But he has a secret. A big secret. John is a millionaire.

 

Growing up, John’s dad was a pastor. He was a wonderful man and excelled in many things. There was just one area that John saw as a weakness in his dad’s life. He thought he needed more knowledge of business administration.

 

John felt called to the ministry, but he didn’t want to make some of the same mistakes that his dad did. So, he went to college, majored in business administration, and fell in love with finance. It was a wise move. John told me, “That information has paid off ten-fold for me.”

 

Opting Out Of Social Security

Upon ordination, John decided to opt out of Social Security. As he told the review board, “I am in the ministry of proclaiming hope, and Social Security is a false hope.” He had already paid enough into the system to receive Medicare benefits, but he knew he would have to cover his entire retirement on his own. With the funds he would have paid into Social Security and more, he began investing for retirement.

 

He set his retirement saving goal at $1,000,000. He calculated that if he could save that much, withdrawing 4% a year would be enough to replace Social Security in retirement without depleting his savings. Later, he adjusted his goal to account for inflation and lower interest rates. John emphasized to me that it’s important to regularly evaluate your plan and adapt.

 

The 50/15/35 Budget Rule

Having a goal is only the first step toward a secure retirement, though. That’s the easy part. The hard part is finding room in your budget to save enough money to actually reach your goal. How did he do it?

 

John and his wife decided that to achieve their long-term financial goals, they needed a plan. They decided to follow the 50/15/35 budget rule. Fifty percent of their income went toward living expenses, 15% they gave to the work of the Lord, and 35% went into savings. Their real-life percentages weren’t always exact, but those were the targets that they aimed for.

 

It wasn’t easy. When he started out, he was only making $18,100 a year, and that included his housing allowance. But they found ways to make it work.

 

For years, their only vacations were camping. They always bought used cars and their furniture was (and still is!) far from the finest. They made sure to deduct everything imaginable allowed by law on their taxes.

 

When they were ready to buy a home, they bought one under market value and did as many of the repairs as they could on their own. Though they had credit cards, they never carried a balance from one month to the next. As John explained, they “just simply lived on less.”

 

Staying Motivated

Living within your means is a huge struggle for most Americans, much less living below your means in order to save for retirement. Retirement is so far off in many people’s minds that it’s easy to ignore and put off, thinking you have plenty of time. I asked John how he stayed motivated all of those years and was able to keep his present wants in submission to his long-term needs.

 

His answer: setting goals. However, even as a goal-oriented person, John knew that just having one big retirement goal would not be enough to sustain him over the long-haul. He broke things down into smaller incremental goals that were easier to achieve.

 

In order to set his goals, he used the rule of 72. For the rule of 72, you divide 72 by your rate of return to find out how long it will take for your money to double. For example, if you are earning a rate of 9% on your investments, it will take 8 years for you to double your money. (72/9=8)

 

John knew he wanted $1 million at age 65. Assuming a 9% rate of return and using the above calculations, that meant that he needed to have $500,000 at age 57, $250,000 at age 49, $125,000 at age 41, and $62,500 at age 33. There was no possible way they could save that much by age 33, but that didn’t stop them from trying.

 

Every year they would max out their 403(b) and they invested steadily in Roth IRAs when they became available in 1997. They made a habit of saving and kept in mind that they weren’t just saving for themselves, but so that they could be generous in retirement both with their own family and with others.

 

Achieving Millionaire Status

Despite the dotcom bubble at the turn of the century and the Great Recession, John has accomplished what he set out to do. In fact, he has far surpassed his original goal.

 

By the time his 3 kids finish college, they will have 3 Bachelor’s degrees, 2 Master’s degrees, and $0 in debt. Between their savings and the scholarships their kids were able to earn, they have it all covered. It’s their gift to their children. John himself led by example and got his doctorate completely debt-free!

 

With a paid-for house (they did it in 17 years) and almost twice what they wanted in their retirement accounts, John really doesn’t need to work. But he won’t be ready to stop anytime soon. As he says, “I know we could retire now, but ministry is too much fun.”

 

John’s Advice On How To Become A Millionaire Pastor

John says he has noticed that many pastors don’t begin to save because they are overwhelmed by the process and don’t understand how savings can benefit them for years to come. Too many pastors are scared of money, whether it’s their own personal finances or preaching on stewardship. You can’t preach on stewardship until you’re practicing it, so the place to start is in your own home.

 

How? This is the path that John took and has proven effective:

 

1. Set a goal. The first step is just figuring out what it is you need. Do you need to save for college? For retirement? To care for a special needs child? How much? This calculator can help you set a goal.

 

2. Have a plan. John chose to follow the 50/15/35 budget plan. You can do the same or come up with another plan. You can use this retirement calculator to get a feel for how much you need to save to realize your goal.

 

3. Work your plan. Once you have a plan, follow it. Pablo Picasso said, “Our goals can only be reached through a vehicle of a plan, in which we must fervently believe, and upon which we must vigorously act. There is no other route to success.”

 

If you follow those three simple steps, it will be worth it. As John told me, “Years of sacrifice will pay off in abundance in retirement.”