By: Kevin Lowry
What a roller coaster ride. The market was up today. Or was that yesterday? It was down the day before that. Way down. Tomorrow, who knows? The financial news these days is fraught with anxiety. Upheaval in the markets. Political gridlock. Rancorous debate. Particularly when it comes to money, the uncertainty surrounding the future can be disconcerting, even paralyzing. A friend of mine sends me alarmist emails from various groups, peddling gold or other “safe” investments. In times of fear, there’s money to be made. For many people who lived through 2008, there is also a new, strong, and visceral response to volatility. With the advent of defined contribution retirement plans, people who have spent years saving in their 401k plans saw their accounts rocked hard that year. I don’t even want to recall how dramatically my savings got hit. Worse, I have friends who refused to look at their account statements for years. Many who thought they were close to retirement weren’t anymore. In the face of radical financial uncertainty, as Catholics, how should we respond? I don’t pretend to know what the future holds. Yet there are a couple principles we can hold onto in the midst of even the most extreme uncertainty: faith and prudence.
Faith
How many times are we told in Scripture to “be not afraid?” We know that we can’t serve both God and money (Matthew 6:24). If our faith in money transcends our faith in God, look out. 1 Timothy 6:17-19 provides outstanding guidance. Let’s assume for the moment that most of us can be regarded as “rich” by historical standards.
Tell the rich in the present age not to be proud and not to rely on so uncertain a thing as wealth but rather on God, who richly provides us with all things for our enjoyment. Tell them to do good, to be rich in good works, to be generous, ready to share, thus accumulating as treasure a good foundation for the future, so as to win the life that is true life.
So even when our financial lives hang in the balance, we know God remains in control. The markets, they say, are motivated by fear and greed. Our motivation must be far different: we’re called to act out of love, for God and others. Therefore, even if we are directly impacted when the market takes a dive, it can be a spiritual opportunity. Read the verses above again, slowly.
We Catholics have the ability to rise above financial fear and anxiety to the extent we place our faith in the Lord. This doesn’t mean that swings in the market don’t matter or don’t affect us, it means that our hope rests upon a solid foundation that is more important and enduring than money. In the end, we are stewards of wealth for the glory of God and the service of others.
Prudence
The next principle is that of prudence. Our financial lives vary widely, and our decisions must be determined according to our individual circumstances. However, prudence is the right path especially when things get crazy. Consider the following scenarios:
Scenario: A friend of mine lost a substantial percentage of his retirement plan during the recent market turbulence, and panicked. He ended up making decisions to modify his investment portfolio and reduce market risk at exactly the wrong time. When the market improved, he lost out on upside potential. Unfortunately, he was in very good company, many individual investors did the same thing.
Prudent move: financial planning is sort of like disaster planning — it’s much better to be prepared before the disaster happens. Using a disciplined approach according to your age and state in life over the course of time is prudent, and generally yields better results. If you need a financial advisor, seek out a faithful and qualified individual, beginning locally at your parish. Then make sure you are purposeful about your goals and the associated risks in your retirement savings portfolio.
Scenario: Another friend has a high level of credit card debt. After taking a financial planning course recently, he lamented that he’s still paying for meals he ate over two years ago. When he lost his job, he ended up losing his house, too.
Prudent move: living beyond your means is always bad, but riskier still in today’s environment. Use every opportunity to reduce debt, build an emergency fund and budget your spending. Make sure your spending priorities are in line with your financial priorities — beginning with your tithe.
Scenario: I know one individual who is so scared about his financial predicament that he is immobilized with fear. Rather than putting together a plan, he has given up and spends in an attempt to make himself feel better. So far, it hasn’t worked!
Prudent move: if you’re in trouble, a plan and small steps towards written goals help provide hope. Most important, pray and have the humility to get help if you need it. The Lord can use even adverse circumstances for our benefit, and his glory.
Recall the parable of the rich fool Jesus relates in Luke 12:20-21. “You fool, this night your life will be demanded of you; and the things you have prepared, to whom will they belong? Thus will it be for the one who stores up treasure for himself but is not rich in what matters to God.” By exercising faith and prudence during these turbulent times, not only will we opt out of the emotional roller coaster and avoid the plight of the rich fool, we stand to gain eternal wealth beyond our wildest dreams. Talk about maximizing returns! Do you know any examples of people who have done well exercising faith and prudence in their financial lives? Note: For those interested in learning more about finances from a Catholic perspective, I like Phil Lenahan’s “7 Steps to Becoming Financially Free.” My wife and I are leading a study at our local parish this fall using the program.