An Interview with Don Headlee

Enrichment interviewed Don Headlee, executive vice president of AG Financial Solutions, Springfield, Missouri, for a final word on the subject of money and ministry.

by Don Headlee

Drawing from your background of sitting on a church board, helping manage a financial institution for 25 years, and serving as executive vice president at AG Financial, how can ministers create a stronger foundation for both their personal finances and the finances of their churches?

HEADLEE: If I could share one big idea, it’s simply to be proactive. Waiting to address financial issues often leaves people with limited options. This has application in many areas of finance, but especially in the areas of retirement and investing. Those who start thinking about it and acting on it early set themselves up to be better prepared for the future and able to handle bumps in the road along the way. One of the hardest things to see is ministers who want to retire but either don’t have a retirement plan or don’t have enough funds to sustain themselves in retirement.

Through our country’s recent recession, what did you observe as primary areas of vulnerability for churches? And looking forward, what should pastors do to better prepare their churches in these areas?

HEADLEE: I saw many churches struggle because they did not have proper cash reserves to compensate for the low tide of giving. We encourage people to establish savings, or cash reserves, that could cover three to six months of expenses in case of an emergency. That personal finance wisdom is the same for churches.

What common characteristics did you find with churches that weathered the recession well?

HEADLEE:The churches that did well through the recession had several key things in place: adequate cash reserves, an established culture of stewardship, and properly structured debt.

Can you further explain what a healthy culture of stewardship looks like and what it means to have properly structured debt?

HEADLEE:A church that has a culture of stewardship most likely started with a pastor who’s not afraid to address one of the most discussed topics in the Bible: money, and the biblical principles surrounding it.

When a church embraces these teachings of stewardship and generosity, and when leadership develops givers within the church, something great happens. People start to tithe consistently and find new ways to bless ministry - even with longer-term planned gifts, like endowments, donor-advised funds, and charitable gift annuities. But the most powerful aspect, beyond the church experiencing financial blessings, is the personal blessings people experience when they take God at His word and worship through their finances. I recently read a quote from Corrie ten Boom that sums it up. She said, “I have held many things in my hands, and I have lost them all; but whatever I have placed in God’s hands, that, I still possess.”

Having properly structured debt is part of good stewardship. This simply means having the right mortgage product that best meets the needs of the church with a debt load the church can handle. We sometimes see churches get into a place where they’re looking to secure financing greater than their budget can support. If they do business with a lender that doesn’t have their best interests in mind and doesn’t understand how churches operate, churches may get exactly what they asked for - but with the risk of delinquency and ministry disruption.

Mostly, the problem we’ve seen is when churches look only at the interest rate when considering a loan. While rate is important, it’s critical to look deeper at the other components of financing that could present risk down the road. For example, a church may obtain financing with an attractive rate, but it’s often a five- or seven-year balloon note. When that short-term loan comes due, the church is left needing to refinance at, often, an inopportune economic time. This leads to additional fees and usually a higher interest rate, even if the refinance is with the original lender. What’s worse, we’ve seen several cases where the original lender elects not to renew the loan, and the church must then scramble to find a lender to refinance the debt. This is why it’s crucial not only to have a lender you can trust but also one that understands ministry and cares for the long-term health of the church when providing a loan.

What about ministers themselves? What should they be considering with their personal finances?

HEADLEE:I’ll reiterate that being proactive is key. The average retirement balance of pastors ages 61 to 70 within the AG retirement plan is around $90,000, and the median balance is around $39,000. With an average life expectancy of 80 years, a pastor retiring at age 65 will have to make that balance stretch for what could be 10 to 20 years. My fear is that the retirement balance will not adequately sustain the cost of living in retirement.

It’s also important for ministers to learn to invest wisely. Many investors focus solely on the interest rate, but there are actually three main factors to consider. They all have to do with the stability of the investment fund and the institution itself. First, investors need to ensure the financial institution is meeting at least the minimum financial requirements legally mandated. If it’s not meeting the minimum requirements, investors should be very cautious. Second, look at the strength of its capital position and liquidity. Does the institution have adequate funds on hand? Third, if the investment product is tied to lending, evaluate the amount of loan delinquencies. This also is an indicator for overall risk. A key principle to consider is that rate is usually tied to risk. The greater the risk, the greater the rate should be. Regardless of your appetite for risk, it is always advisable to understand the stability and security of the investment fund and the financial institution before investing.

We know from experience that AG Financial handles many of these areas you’ve addressed. If ministers reading this are interested in finding ways to strengthen their churches’ financial foundation or even their own personal finances, what should they do next?

HEADLEE:It always starts with understanding your financial goals, finding a financial institution that you can trust, and asking the right questions. Our staff at AG Financial is always on hand to help people find the right financial solutions for personal finances like retirement planning, investments, and planned giving, and for church financial needs, from ministry lending to church insurance programs.