A good person leaves an inheritance for their children’s children, but a sinner’s wealth is stored up for the righteous. Proverbs 13:22
The plans of the diligent lead to profit as surely as haste leads to poverty. The wise store up choice food and olive oil, but fools gulp theirs down. Proverbs 21:5, 20
The rich rule over the poor, and the borrower is slave to the lender. Proverbs 22:7
The prudent see danger and take refuge, but the simple keep going and pay the penalty. Proverbs 22:3; 27:12
So if you have not been trustworthy in handling worldly wealth, who will trust you with true riches? Luke 16:11
For which of you, intending to build a tower, does not sit down first and count the cost, whether he may have enough to finish it; lest perhaps, after he has laid the foundation and is not able to finish, all those seeing begin to mock him, saying, “This man began to build and was not able to finish.” Luke 14:28-30
I really dislike talking about money. On a personal finance level at least, go macro and I am all over it. I will talk about fiscal and monetary policy, economic incentives and corporate debits and credits all day long, but the micro level is something where I get a lot less excited. It is pure minutiae to me when conversing about taxes, rent, insurance payments and grocery costs. My eyes glaze over and drool runs from my slack jaw. I may be able to get through the theory of personal financing alright, but please do not ask me to apply it – at least without providing a bed and a pillow.
Which meant that today, as my thoughts strayed to my family’s finances, it was only natural that I should start widening my view a bit. I sort of changed the pitch of my nose and flew a little higher to get a better perspective. This revealed something which I have thought about on the macro level many times, but never applied directly to personal finance: there is a strong disincentive to save and a strong incentive for debt in our current fiscal climate. You might say something like, “No kidding, Sherlock. The sun rises in the east too!” So afford me a bit of a defense of my astounding brainwave.
First, as mentioned a moment ago, I hate thinking about personal finance (please do not forget that). And second, there is often an unintended wall erected between the macro and the micro in our thinking on lots of topics. Finding ways to link the two is one of the paths to understanding. So the breakthrough here is that a lot of the macro-level policies adopted at the federal or state level end up directly impacting our behavior whether we are conscious of it or not.
In my last post (16-fold) I pointed out that as costs increase for something such as cable television, the normal buyer will continually assess the value he/she is receiving compared against the cost. Eventually, the buyer will determine that not enough value is gained to justify the cost and will cancel the cable bill. But the corollary is that this is done because the everyday person has something on which he/she would RATHER spend that cable money. I cannot think of any situation in which these two thoughts are not connected. For the more analytically minded, let me lay this out in a more formulaic way:
– If cable television is purchased at $X, then the perceived value of it to the buyer is greater than every other opportunity for $X
– If cable television costs increase to $Y, then the perceived value of it to the buyer may become lesser than opportunities at $X
– If a person cancels their cable television in response to the cost increase, it is fully due to a perception that more value can be gained from other opportunities
Taking this principle to personal finance and my epiphany that we are disincentivized to save and incentivized to spend, there must be an observable source factor that drives this behavior in so large a percentage of the population. Sure we could attribute it to some cultural peculiarities that increase spending like persuasive marketing, a keeping-up-with-the-Joneses mentality, and/or a decreased stigma associated with debt. But one of the biggest factors is in the fact that, consciously or unconsciously, we are choosing a perceived higher value good for the scarce resources at our disposal and therefore something is pushing a large percentage of the population toward debt and away from saving.
The most obvious answer for this source factor is that interest rates are simply too low. We are all familiar with at least a rudimentary idea of how supply and demand are related (i.e. that as supply increases against constant demand the price falls, or as demand increases against constant supply the price increases), consequently it should come as no surprise that if there is more demand for debt the interest rates should rise to cool that demand against finite levels of money. But as our federal government pumps more money into the economy, or as federal bond rates are issued at abnormally low interest rates, interest rates offered to the public from financing organizations mirror this artificial rate which only serves to perpetuate the increase in demand.
Fundamentally this means that a semi-rational person, without any outside motivation, acting consciously or unconsciously, looks at the relatively cheap cost of debt and says, “I can get more from taking out a loan on a house, car, or university degree than I can from saving this money and collecting annual interest.” You see that it works from both directions; the incentive goes up to borrow and there is a corresponding decrease in incentive to save.
In keeping with the slogan of Deus Vincit (No matter the topic, God is the theme), how should we respond as Christians to this simple epiphany of mine? I posted at the top several exhortations from the Proverbs and from Jesus about two themes: saving and thinking ahead financially. The purest lesson that can be learned from this situation is that we must be deliberate about our planning and our actions. We have been instructed to be wise with what is given to us because it is a gift from God and we have been told resolutely that it is foolish to spend more than you make.
However, this is one of those times where I believe firmly that the Bible’s instruction is one of generality – establishing a principle to guide our deliberations and actions. Over and over in the Bible we are also reminded that we will be tried and buffeted by storms of life for which no preparation can be made. Financial suffering falls into that category. I am sure that there are hundreds of examples that each of us could cite to show that, even when a person has been as faithful as possible with their monetary blessings, the problems of a sinful world have derailed their best plans and intentions. Lay-offs occur, health takes a nosedive, the economy turns and disasters strike through no fault of the victim … and God knows that.
There is therefore a balance that must be struck in the life of a Christian. We are to be wise with our possessions while simultaneously storing up treasure in heaven. We are to be deliberate in our saving while realizing that it is a fragile thing. We are to attempt to utilize our blessings for the security of our families while knowing that it is actually God who cares for us and provides for us. And we are to disregard the seeming wisdom of our economic surroundings and buck the trend of debt simply for debt’s sake in the physical realm because our wealth is not our own.
Our wealth is a gift from the God who clothes the lilies of the field in splendor that would have made Solomon jealous. Our wealth is a gift from the God who fills the bellies of even the most common birds of the air. Our wealth is a gift from the God who knows so much more about our needs than we do, that He was willing to send a Savior instead of the General/King/Revolutionary for which we asked. Our wealth is from the God who is the originator and sustainer of all things … let us be faithful with it.