Monday, July 31, 2006

Cash Salary, part three

So now we've talked about the factors to keep in mind. How do you calculate the actual amount you need to ask for?

All of this forms a sort of calculus for establishing the cash salary that you need. Here are some suggested steps for determining the best numbers for you:

1. Re-evaluate your budget history. If you're good with this sort of thing, this step will probably take very little time. However, many will have to do some heavy processing to get this accurate. Don't fudge on this step-- this will become the cornerstone for the rest of this process, and the care you put into this part will determine the accuracy of your final numbers. Here's the key: the best way to re-evaluate your budget history is to simply determine whether it accurately reflects current practice. If it doesn't, then put in the numbers that do reflect it. This is no time to be timid, humble, or hopeful; don't state what you wish the numbers were, but what they actually are. And be sure to include EVERY aspect of income and expense you have-- even if you haven't budgeted for them in the past.
2. Calculate the effects of the changes and adjustments. The cost of living, ministry costs, and some housing costs discussed in Part Two effect this calculation. How will your spending patterns change between now and then? What will you add to your budget that you aren't paying for now? What will drop off of your budget entirely? You should go through your budget history line-by-line and calculate what should be adjusted.
3. Spend some time considering the future. What will likely change over the coming year or two? Will any household changes take place-- will you get married, have children, or take in a dependent relative? Will your car(s) survive the coming years-- and will they require any major repairs or maintenance? Will your children begin school or college? Will you begin another degree or educational program? Will your spouse start working, change jobs, or leave work? Now-- here's the key-- estimate how these changes will effect your needs in terms of cash salary?
4. Do the math. Take your budget history (step 1), adjust the numbers to accommodate the changes due to a move to a new ministry (step 2), and add in the projected changes for the next few years (step 3). The result should be a good starting point for a budget in your new ministry position.
5. Add in 1-3%. No matter how careful you've been, you have probably been off a little bit. Estimations are like that-- it's why they're called "estimations". To account for this, I recommend that you put in a fudge-factor of 1-3% additional in your budget. If you don't need it, you can always put it in savings.
6. Estimate your tax burden. You can roughly calculate take-home pay through a handful of calculators online, and you can also reverse them to see what your income must be to support a certain dollar-figure of take-home pay. It is worth the time fiddling with these, even though they can only give you rough amounts (remember, your tax status is probably different because of your status as a pastor-- more on this in another post). If you can estimate what total pay it requires to make budget from step 4, you're much closer to having a real number to present to the church you're negotiating with.
7. Don't forget to save. Probably the easiest part of the budget to cut-- or forget to add in to begin with-- is savings. When budgets are tight, it's hard to be disciplined about saving. But it is when budgets are tight that savings become the most important. I suggest that you set up an account with a bank like ING Direct, where you can set up an automatic draft into savings. It will pull out a pre-determined amount on a pre-determined schedule, and all you have to do is record the transaction. When you need your savings, it will be there for you.
8. Do the math-- again. Total up all of these, and you're done. Congratulations-- you now have a functional and accurate budget.

Now you have the number you should take back to the church you're negotiating with. That's the amount you should ask for.

I know--actually asking for this amount is another thing altogether. You probably aren't certain if you even have a right to simply ask for whatever amount you believe you need. At the end of the series on "Negotiating your terms of call" I'll talk about how to muster up the courage to ask for what you need.

For now, just get the numbers on paper and move ahead. We'll get to the actual negotiation in time.

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