Last revised
2008 May 22

[This entry will continue to be revised in response to feedback. Some newly added material is in smaller type. I thank David Mustard and David Stafford, among others, for useful input.]

NOTE: Recent changes in the American economy are not fully reflected here. Please read this note. Also note that much-needed new regulations of the credit-card industry have been proposed by several U.S. government departments and will go into force by 2009.

It is also of great spiritual importance because how you use your money is how you express your choices in all areas of life, not just church activities.

Many churches, including mine, now have "financial ministries." I've been working out what I think of them. That's what today's epic-length Notebook entry is going to be about. I should make it clear that I'm strongly in favor of the concept of financial ministry. My quibbles are only with the peculiarities of some of the materials used in it.

For further insightful criticism of many of the ideas that are widespread in "Christian money management," see the web site of Gary Moore [link updated].

Book recommendation: The Christian money management book that I recommend is Degunking Your Personal Finances, by Shannon Plate. The author is active in Christian financial ministry, but the book is written for secular audiences and does not mention Christianity directly. Don't let that put you off; the content of the book is very much based on Christian values. It's balanced and free of gimmickry.

How is "Christian money management" different from anybody else's money management? To a large extent, it's not. What works, works. But some Christian doctrines loom very large:

• God owns everything and we are just His stewards. Our property isn't really our own and isn't a measure of our personal worth.

• We are held to a higher standard of honesty because God is always watching. Ethics isn't just whatever you can get away with.

• Money does not buy happiness, and material acquisition is not the purpose of life. There is much to be said for the old-fashioned virtue of contentment – the art of realizing that if you aren't happy now, you still won't be happy if you simply acquire more money or possessions.

• Marriage is a permanent commitment. This doesn't sound like a financial issue, but it is. Secular counselors such as Suze Orman often advise couples to break up when they disagree strongly about money. For the Christian, that is not an option. Nor can marriage be viewed as temporary in the first place.

By counseling thousands of couples, advisers such as Burkett and Ramsey have collected some interesting data about the kind of financial problems people commonly have. Here are some recurring themes:

• (1) Many people need lots of basic training. Since our educational system seldom gives people any formal training in personal finance, there's no telling what an intelligent person might be unaware of.

  Dave Ramsey has a good collection of people's stories of how they made unwise purchases or accepted very bad deals. I'm a little worried about the position of emotional vulnerability that people put themselves in when contributing to this collection, but the stories are worth reading.

• (2) Lots of people have too much debt from automobiles and credit cards. Credit cards are especially perilous because they encourage totally unplanned borrowing and the terms of the loan are variable. A credit card is the only major type of loan where the terms can change radically after you've received the money (regulations proposed in 2008 will stop this).

  Many seemingly prosperous families are in fact in terrible financial shape, with negative net worth – they couldn't pay their debts off by selling their house and cars. This is often connected with imprudent mortgages, such as interest-only, variable-rate loans whose payments are about to rise out of reach.

• (3) Some people are doing the wrong amount of work, either too much or too little. Sometimes the best option for a person in financial straits is to take on more work, especially if they're not working full-time in the first place. At the other extreme, some people end up overworked because they can't live within their means, even as those means expand.

• (4) The concept of retirement gets some well-deserved criticism, at least if it means working too hard at a job you hate in order to quit at 65 and stop being useful to anyone. Idleness is not a worthy ambition.

• (5) Nonetheless, most people need to save more for retirement because Social Security is not trustworthy, and the days of paternalistic employers are over.

• (6) The concept of bankruptcy also comes in for criticism. For a Christian, declaring bankruptcy is not like cashing in a ticket. It does not necessarily erase the moral duty to pay the debts. (Someone has to pay them, even if the debtor doesn't.) This is analogous to the Christian view of divorce, which may be the only option in an abusive situation but does not erase the marriage in the eyes of God.
  
  See further notes on bankruptcy below.

• (7) The wise person is not caught up in fads, fashions, and status symbols. Many advertisements try to get you to buy things on the ground that you "deserve" them or it's traditional for people at your level of status to have them, without regard to whether you yourself actually want them or can afford them.

  Non-Christian advisor Suze Orman has the interesting psychological insight that people overspend (mainly on entertainment) when they're not happy with their living situation. People are happy to live frugally when they like where they are and feel that they're on the path to success.

• (8) Sometimes, silly ideas spread like wildfire through a church or community and have to be countered. These include get-rich-quick schemes, pyramid schemes, and the "prosperity gospel" (the notion that "God wants you to be rich").

  Sometimes we even have to warn Christians against outright charlatanry, such as fundraisers saying, "If you donate to my ministry, God will make you rich," or "It's a sin not to donate to my ministry — you're robbing God and He will punish you."

  What does God think of this? "Thou shalt not take the name of the Lord thy God in vain." False financial promises are just as wrong when made by a religious leader as by anyone else. I would go so far as to say it's a sin to give money to a religious organization "on faith" if it means not fulfilling your God-given stewardship duties.

Secular advisers agree entirely with (1), (2), (5), (7), and (8). At least one of them also makes much of (6).

First, among some advisers there is a desire to be peculiar for peculiar's sake. This is not overwhelming, but it's one end of a spectrum. It's easy to start a cult...and on a milder level, this shows up as gimmicks and strange techniques which are trumpeted as being the only legitimate way to do things.

Some people feel that in order to be identified as Christians, they need to withdraw from all sorts of innocent secular practices. And the problem is, people with this kind of motive don't listen to criticism. It is associated with a tendency to claim God's endorsement for one's own opinions about economic matters – which, I think, constitutes taking God's name in vain. Some Christian financial books and web sites are peppered with references to Bible verses that are only marginally relevant, the implication being that if something is tied to the Bible, it has to be right.

It is also associated with quackery and conspiracy theories. After writing numerous Christian money management books, Larry Burkett wrote a novel, The Illuminati, which he presented as fiction, but many readers took large parts of it to be non-fiction (somewhat like Dan Brown's The Da Vinci Code). The Illuminati are supposedly a secret society that controls the economy. (Several secret societies over the years, and many fictional ones, have used the name Illuminati, but there is no evidence that they are powerful or that any of them have lasted very long.) Another common villain of conspiracy theories is the Trilateral Commission, which is a real organization, but not secret. Some of these conspiracy theories are reviewed and refuted in Exploding the Doomsday Money Myths, by Sherman S. Smith, published in the early 1990s.

In particular, many of us remember the silly things about the Year 2000 Problem (with software) that were being said in Christian circles. As a computer programmer, I actually had to chair a meeting to respond to concerns. See Gary Moore's incisive critique of fear-based religion.

Second, and more substantively, I have yet to see any of the Christian financial advisers come out and say exactly what money is.

Very simply, money, as a medium of exchange, is how people express preferences. Which is better, a newspaper or a candy bar? Any philosopher will tell you the question is unanswerable, but when people make purchases, they have to answer it.

Failure to appreciate that money is a means of communication has led Christian financial advisers to say strange things about its "mystical power."

When you appreciate that money is how people express preferences, it's perfectly clear why married couples argue about money. People argue over money, using words, because money and words are how preferences are expressed.

Third, I have yet to see much of a historical perspective in any of the material currently being taught. Christian financial advisors don't seem to know where they stand on the stage of history. Even inflation, which is one of the most important historical factors, gets surprisingly little attention.

One reason for the lack of historical perspective may be that in the past, Larry Burkett made some predictions and historical observations that were erroneous. Around 1990, he predicted a severe depression within ten years. This alarmism was one of the worst attributes of the "Christian money management" movement when it was starting. For more about this, see Charles H. Anderton and David K. W. Chu. "Personal Finance and Economics in the Writings of Larry Burkett: How Should Christian Economists Respond?" Bulletin of the Association of Christian Economists 29 (1997): 12-18, which is available online.

What seems obvious to me – though nobody mentions it – is that a lot of what passes for "Christian money management" is 19th-century money management, and in particular, constantly being prepared for the deflationary cycles that occurred every couple of decades until the 1930s.

During a deflationary cycle, being in debt is perilous because the value of the dollar rises and your debts, in fixed dollar amounts, become larger relative to your earning power. That, I think, is the source of the American Christian tradition of hating and fearing debt.

What isn't adequately appreciated is that these cycles are over. We haven't had one for 70 years. After the Great Depression, economic policymakers learned how to adjust the money supply to prevent severe deflation. Some people feel that this means our money isn't "real" any more – it isn't convertible into gold – but that's not a bad thing; what's so great about gold? Tying the value of money to a set of commodities might be useful, but there's no reason to assume gold is the ideal commodity for the purpose.

Another thing history can illuminate is why people don't know how to manage their money. Very simply, times have changed too much. Today's thirtysomethings were children during the "stagflation" of the late 1970s and early 1980s, a strange period during which being in debt was advantageous, and holding cash was not.

They came of age during the "credit card era" of very easy money, which began in the mid-1990s and ended abruptly with the subprime mortgage crisis of late 2007. During this period, people would lend you money for almost nothing, and arguments about staying out of debt had little immediate practical force.

Now we are moving into another era, and we don't quite know what it's going to be like. But it's no surprise that today's young adults were not brought up on the thrift of the 1840s or 1890s. For the last 30 years, people have had strong incentives to manage their personal finances in ways that probably won't be sustainable much longer.

Fourth, there is the problem of a skewed data base. If you counsel people with problems, you won't learn much about people who don't have problems. The skewed data base is unfortunately combined with a tendency toward a one-size-fits-all approach. It is all too easy to turn good advice for one person into commandments for everybody. It is also easy to be taken in by economic misinformation such as the widely reported, but false, factoid that "the average American owes $8,000 in credit card debt."

I think the reason Burkett and Ramsey are so dead-set against credit cards is that they've seen lots of people get into trouble, but they haven't seen people who don't get into trouble. They may be urging extreme measures that ordinary people don't need.

Another way in which the data base is skewed is that personal finance advisors, secular and Christian, often don't understand that risk is inevitable in starting any business venture and even in running a household. People shouldn't take unreasonable risks, of course, but there's no way to be risk-free, and it would be bad for all of us if everyone tried to be free of financial risk all the time. No matter what you do, there's always some chance it won't go the way you expect, and failure to guess the future is not a sin.

Fifth, there is a serious problem with ignorance of normal business procedures on the part of Christian financial advisers. Many of them seem to be totally unaware of the role of borrowed money in business ventures, or the difference between debt and bankruptcy. Borrowing money does not mean you're broke; in my opinion, it is as legitimate to rent a block of money as to rent a piece of equipment.

Having said this, I am aware that churchgoers are often recruited into very dubious business ventures which they themselves don't understand. Please don't go into business unless you know how. In particular, don't buy a package deal from a mail-order or Internet-based company that promises to set you up for great profit. Instead, get some real-world experience working for a business similar to the one you want to start.

Be wary of multi-level marketing, especially if it asks you to either engage in a pyramid scheme, or make a quasi-religious emotional commitment to the organization, or both. And don't invest borrowed money speculatively. Remember that you have to survive the worst case, not just the best case.

Sixth, and last, there is sometimes a certain amount of what Michael Novak calls "aristocratic prejudice." Clergymen and theologians are not businessmen and often tend to look down a little on ordinary business activities, as well as not understanding how they work.

There is also a financial aristocracy. Smug testimonies about "debt-free living" ring hollow if they come from people who inherited money or had other unusual good fortune. Borrowing money prudently has long been an essential part of the American path to prosperity, and if you require people to be "debt-free" all the time, you burden them unduly. Would I deprive my children of a proper education or a safe environment in order to be "debt-free"? No; that would be bad stewardship.

In the worst case, rich people have un-Christian attitudes such as "What's mine is mine and I don't owe anybody anything for it" and "Everybody should have to work as hard as I did." Neither of these is Biblically defensible. What's ours is God's and we owe Him everything for it. And "Thou shalt not covet" commands us not to hold it against people if they have an easier time than we have had.

(1) What does the Bible really say about debt? A quick look at the context shows that "Owe no man anything" (Rom. 13:8) doesn't mean "Don't borrow anything" – it means "Don't refuse to pay your bills." So much for one popular catch-phrase.

How about, "The borrower is slave to the lender" (Proverbs 22:7)? If this means, "It's wrong to borrow money," then the first part of the verse, "The rich rules over the poor," must mean, "It's wrong to be poor." That, of course, is nonsense. It looks to me as if the verse is lamenting an economic fact, and advising caution, but not flatly forbidding people to borrow.

Larry Burkett deserves credit for rebutting the older notion, popular with reactionary Christians, that nobody should ever borrow money for any reason. When financial ministry falls into the hands of less sophisticated teachers, this old-fashioned error often reasserts itself.

I take it for granted that all borrowing must clear at least two hurdles. The moral hurdle is that you must have a reasonable (not perfect) certainty of being able to pay the money back. (Perfect certainty never exists in this world.) The economic hurdle is that you must be getting value for your money; that is, the extra cost of borrowing (not only the interest charges, but intangible costs such as inconvenience and loss of flexibility) must be justified by some benefit. Apart from these two hurdles, I don't see anything in Christian doctrine that puts absolute limits on borrowing. Taken seriously, though, these two hurdles are enough.

Christian financier Gary Moore has tough criticism for those who would burden all Christians by requiring them to be "debt-free." He points out that we already have everything on loan from God. The desire to be "debt-free" can be a manifestation of a kind of selfishness that is altogether contrary to Christian values. Lending can be a way to help people prosper. Requiring them to be "debt-free" can be a way of keeping the poor poor. Jesus rode into Jerusalem on a borrowed donkey.

Using half-Bible-verses as catchphrases does not make for good economics. But the Bible does contain some practical economic advice, some of it timeless and some of it tied to particular situations. One of the best examples is Proverbs 22:26-27 (NIV):

Do not be a man who strikes hands in pledge or puts up security for debts; if you lack the means to pay, your very bed will be snatched from under you.

(2) Is it wrong to lend money at interest?

Everyone remembers that the Israelites were forbidden to charge each other interest on loans during the Exodus (Ex. 22:25). But charging interest to outsiders was permitted (Deut. 23:20). "Usury" (charging interest) is at least disreputable, if not actually forbidden, in Psalm 15:5 and Proverbs 28:8. But in the Parable of the Talents, Jesus approves of profiting by investment (Matthew 25).

I think several issues need disentangling here. First, the medieval Church objected to interest, not mainly because of the Bible, but because of Aristotle, the ancient Greek philosopher who supplied what little they knew about economics. Aristotle believed, erroneously, that when you collect interest, you're collecting money for nothing at all. In fact, however, we now understand that interest compensates you for inflation and for giving up the opportunity to profit from your money in other ways.

Second, from the beginning, Israelites were permitted to charge interest to outsiders. In the absence of any further clarification, I take this to mean that charging interest is not inherently wrong; what is wrong is taking advantage of your neighbor in difficulty.

That is also apparently what the writers of Psalms and Proverbs have in mind. Charging interest to profit by someone else's misfortune is wrong; lending at interest to help someone else prosper is fine.

By this standard, modern banking practices are generally legitimate, but loan sharks are not, and there is legitimate concern (from government regulators, not just Christian moralists) that credit-card issuers and some mortgage lenders have crossed the line. This does not mean banking is evil, only that it needs to be watched closely and regulated.

A few Christian sects, and most Muslims, use a banking system in which interest is completely forbidden. Instead, houses are bought through a rent-to-own arrangement, and instead of getting interest on savings, you buy stock in the bank. This makes surprisingly little difference, and most economists feel that little has changed except the names of the transactions. What's the moral difference between renting a house and renting a chunk of money to invest in a house?

(3) Is it wrong to declare bankruptcy? Some Christian advisors say, bluntly, "yes, because a debt is a promise and you have no right to break a promise."

I think that's an oversimplification.

The purpose of bankruptcy laws is twofold: (a) to keep you productive even if you've run out of money, and (b) to keep one of your creditors from seizing all your assets to the exclusion of the other creditors. Both of these provisions are good for the people to whom you owe money, and for society as a whole. That's the main reason we have bankruptcy laws.

There are, of course, people who abuse the bankruptcy laws as a way of cheating their creditors. (Spend like mad, then go bankrupt.) That is a dishonest practice, but it is not the normal or usual form of bankruptcy. It is also appreciably harder to do nowadays than it was in the past.

Many Christian counselors oppose credit cards because they've seen too many people who can't handle them. I certainly don't advocate borrowing for everyday expenses, which is what you're doing if you don't pay your credit cards off monthly. But plenty of people, myself included, do pay them off monthly. Modern shopping, especially online shopping, is much easier with credit cards than with the alternatives.

And don't let alarmism about "identity theft" scare you off. You have more legal protection when you use a credit card than when you use a debit card, a checking account, or cash. In some cases you even get an automatic warranty on things purchased.

Admittedly, the ethics of the credit card industry often warrant criticism. But although I am in favor of a heavy regulatory crackdown on the credit card industry, I see nothing wrong with using credit cards. The catch is that I set my own limits, and my standards are higher than theirs. (Similarly, I favor tighter regulation of mortgage lenders, but I see nothing wrong with having a mortgage.)

Gary Moore also points out that, for all its other ethical problems, the credit card industry does practice a considerable amount of debt forgiveness (debt cancellation), a Biblical practice that is otherwise very rare in the business world.

(5) Is there such a thing as good debt?

Yes, despite the fact that some people say there isn't. As noted already, prudent borrowing enables people to have better housing, better education, and successful businesses.

Note further that if you don't believe in borrowing, you don't believe in lending either. The same Christian pundits who tell people never to borrow money will tell them to buy CDs or invest in money-market funds — that is, to be involved in the financial industry as lenders. How can one be wrong and the other be right?

(6) Should we ignore economics and just trust God?

The Bible cautions us against undue worry (Matthew 6:34) but also urges us to manage our affairs intelligently (the entire book of Proverbs).

It is certainly true that there is no perfect security in this world, and if you try too hard to achieve security, you'll neglect other, greater goods.

But foolishness does not become wisdom just because it comes out of the mouth of someone in a church setting, and God has never told us we're exempt from the laws of economics and arithmetic.

I have heard people give bad economic advice and, confronted with the likelihood that it will turn out badly, they just smile and say, "Don't trust the ways of man; trust God." That quickly becomes a universal excuse to ignore facts. It is silly and in my opinion violates Matthew 4:7 ("Do not put the Lord your God to the test").

And I have cringed while someone, giving a "testimony" in church, said she didn't have any money in her checking account, but she "trusted God" and wrote a check anyway. I wanted to stand up and say: You told a lie and committed a crime, and as far as I know, God still objects to both of those things! Writing a bad check is as wrong as any other form of fraud.

First, beware of emotional vulnerability and manipulation in any kind of personal finance group, whether inside or outside the church. It is easy for a group leader to maneuver people into a position of vulnerability by getting them to reveal financial information that ought to be kept private.

In particular, don't let people make you feel guilty for using the tools of the modern economy in the normal way.

Second, remember that financial missteps and misfortunes are not sins. When you regret that you handled your money a particular way because it didn't work out well under the circumstances, that doesn't mean you're guilty of a sin. Even the most saintly people are not economic geniuses.

Third, remember that economics is a matter of diverse opinions. No human being deserves your complete loyalty. It is much better to get the opinions of many knowledgeable people. Then you'll know what points are widely agreed on and what points are a particular person's opinion.

Fourth, remember that, simply because it is an open market in a well-governed country, the American economy generally has high standards of ethics. You should always think critically, but ordinary methods of doing business are not, in general, immoral. On the contrary, a free market imposes high standards of honesty and diligence on everyone by making it hard to prosper without them.

If you think that business per se is inherently corrupt, you may have been influenced more by Marx than by Christ. If, on the other hand, you think market economics means you need not think about the effects of your actions, you may be following not Jesus but Ayn Rand. And if you will only do business with financial advisers who identify themselves as Christians, you may be easy prey for charlatans.

Above all, beware of the compartmentalized mind. Business is not a game separate from real-life ethics. Far too many sincere Christians have done great harm by failing to bring their Christian values with them into the business world. Many more have made bad decisions because, either on their own or following compartmentalized leaders, they failed to bring together information from diverse sources to understand a problem.

And you should especially be wary of what I call "outsmarters" – people who think they've outsmarted the system (whatever the system is) and can get away with something that isn't a commonly accepted practice. Those are the ones who often get into big trouble doing something unethical and/or illegal.

Note added 2008 May 15

The material above is not entirely up to date. In just a few months, the American economy has changed drastically, and popular teaching about personal finance has changed even more. Enthusiasm for "debt-free living" has spread beyond Christian circles into the culture as a whole. In fact, I would go so far as to say it has become a fad; people are wanting to be debt-free for no good reason, as if they were expecting a deflationary crisis, when in fact inflation is what's on the horizon. As Martin Luther said, humanity is like a drunkard who falls off his horse on the left and makes up for it by falling off on the right.