Put Your Money Where Your Faith Is
Save, share, invest — and trust in God.
by Tom McFeely | Source: Catholic.net
Catholic investment adviser Phil Lenahan says Catholic parents have a biblical calling to be wise stewards of the material wealth that God bestows on their families.
But what does that calling mean in practical terms? What principles should guide Catholic dads and moms as they seek to provide for their families’ future needs through sound investment of the family income?
And how can they avoid investing in companies that are linked to gravely immoral activities like pornography or abortion?
Lenahan, who lives with his wife Chelsey and their seven children in Temecula, Calif., and is a Register “Family Matters” columnist, says the first principle that should inform Catholic parents is that they have a practical and spiritual responsibility to save money for the future.
“It is scriptural to save for those future needs,” Lenahan says, citing Joseph’s advice that Pharaoh should set aside 20% of his realm’s crops in years of plenty to protect against the coming years of famine. “Most of us are going to hit a time when we’re not able to generate the annual income that we can when we’re younger.”
Lenahan notes that the Bible also has passages that warn against hoarding. The key difference is the motive involved in setting aside wealth: As long as it’s done to meet legitimate future needs, rather than to pursue a life of future idleness or other selfish ends, investing is a God-given family responsibility.
Another issue is the morality of taking risks with the family savings by investing in the stock market or other financial instruments.
Samuel Gregg, director of research for the Michigan-based Acton Institute, says there’s nothing wrong with Catholics accepting some degree of uncertainty in their investment decisions.
Gregg says risk is an unavoidable component of any wealth-creating initiative. When a small family business is started, for example, there is no guarantee that the business will survive. If it fails, the family will lose the time, effort and financial resources committed to the enterprise.
The key virtue to exercise in making any financial decision is prudence in assessing whether a given investment is responsible or reckless.
Says Gregg, “I think that reasonable risk-taking is very much a reflection of the virtue of prudence.”
So what percentage of family income is it prudent to save for future needs?
Lenahan says a “basic rule of thumb” is in the range of 10%.
He also suggests families get more specific guidance by utilizing software tools available on financial-management websites. One such tool for calculating a reasonable savings target is posted on the website of Lenahan’s organization, Veritas Financial Ministries, at veritasfinancialministries.com (click on the “My Veritas Plan” link).
Lenahan says that, while Americans had an average savings rate of 7% of income from 1970-2000, in 2005-’06 overall savings actually declined marginally.
A major reason for this financial pinch is that so many families — even faithful Catholic ones — get caught up in the “buy-now” mentality of America’s consumer culture.
Lenahan believes the remedy for the overspending generated by this consumerist mentality is to adopt “a faith-filled, common-sense perspective” about what your family really needs.
When families do that, they generally find that it’s possible to meet their short-term and long-terms financial goals, he says, and even to be more generous in their charitable giving.
“Most of the time the money is there,” adds Lenahan, “but you end up having to make some decisions that are a little bit painful.”
Another thorny issue is the problem of moral investing — especially in a society where major corporations like AT&T are openly involved in marketing porn and where other companies routinely make charitable donations to pro-abortion groups like Planned Parenthood.
According to the Acton Institute’s Gregg, a Catholic investor must strictly avoid all “formal cooperation” with evil by not investing in companies directly involved in activities that are always gravely immoral, with the deliberate intention of supporting those immoral activities.
An example would be to invest in a pharmaceutical company that produces chemical contraceptives, with the specific desire of helping the company promote contraceptive use.
But most investment decisions are less clear-cut morally. And while Catholics should always strive to avoid involvement with evil, Gregg noted the Church does not require them to avoid any association with organizations that may be involved to some degree with immoral activities.
Moreover, in today’s complex marketplace, it’s often not possible for the average investor to know whether a given company is indirectly involved in immoral economic activity. And a Catholic family might want to invest in financial instruments like mutual funds, meaning that their investment dollars will be spread among many companies.
When contemplating such investments, Catholic investors should undertake “due diligence” to find out if a company is directly engaged in immoral activities, or “consult with an investment advisor who specializes in this area,” Gregg suggests.
Lenahan points to an article by Catholic apologist Jimmy Akin, available on the Internet at catholic.com/thisrock/2005/0511bt.asp, which provides a good explanation of the moral principles involved in ethical investing.
Lenahan says investors could consider Ave Maria Mutual Funds (online at avemariafund.com) and Epiphany Funds (epiphanyfund.com), as well as some non-Catholic Christian mutual funds, as possible avenues for ensuring that mutual-fund investments are directed to morally sound companies.
Consistency Is Key
Robert Mylod is a retired banking executive and father of six who lives with his wife Monica in Manasquan, N.J.
Looking back over his and his wife’s experience of saving and investing while raising and educating a large Catholic family, he points to the importance of implementing “basic stuff” like making a budget and sticking to it, paying bills on time and avoiding unnecessary debt.
“The only debt my wife and I incurred, with a few minor exceptions, was a mortgage on our home,” Mylod says.
Early on in their marriage, the Mylods decided that the best bet for growing their family’s savings was to set aside a fixed amount of money every month and invest it in the stock market.
Such consistency is a fundamental component of a successful investment strategy, he believes.
Says Mylod, “People are rewarded by following that kind of approach.”
In more ways than one, God willing.
5 Steps to Faith-Based Investing
1. Avoid unnecessary debt and practice sound stewardship of your resources
2. Prayerfully discern what your family truly needs to live in modest comfort, and what percentage of your resources you can allocate to charitable giving
3. Save and invest a portion of your income for legitimate future needs, not materialistic wants
4. When choosing investments, accept a reasonable level of risk-taking as a way to practice the virtue of prudence
5. Know which companies will benefit from your investment dollars — and make sure they are not involved in immoral pursuits
Tom McFeely is based in Victoria, British Columbia.
Source: National Catholic Register - March 9-15, 2008 Issue