By MATT POTTER
RADICAL JOY — CATHOLIC STEWARDSHIP AND ABUNDANCE
There is an academic field called Behavioral Finance that helps us understand why we make financial decisions that, on their surface, seem illogical and self-destructive. For example, it is common knowledge that we want to buy low and sell high. Yet when we are left to our own devices, we typically buy after the market has gone up and sell after it has gone down. We buy high and sell low – the exact opposite of what we know we should do. These decisions are based on emotions – fear and greed – and not logic. We buy too late because greed drives us to get what everyone else has and not be left behind. We get out too early because we fear losing everything we have.
This doesn’t just apply to individuals, either. There are many examples of very sophisticated investment committees serving massive public pension funds having done the same thing.
Individuals have a more personal stake in their investments, so it is understandable why they would inject their emotions into their decisions. However, pension-fund-investment committees are usually made up of highly educated members receiving advice from professional, well-credentialed investment managers and consultants. Even with all that high-powered help, they have been shown to act in the same illogical, emotion-driven manner as the individual investor.
Why, oh why, dear reader, is this the case?
Here is the conclusion found in the studies: It hurts more to lose than it feels good to win.
That simple truth causes people to be illogically risk-averse and make decisions that are not always beneficial to their well-being.
Okay, this is not a column giving investment advice. This is a column about stewardship. Who cares about investment committees?
In our examination and discussion about Treasure, we must take into account how our emotions guide the decisions we make; not only about our investments, but about how we give away our money as well.
Our money? That’s not as straightforward as it seems.
As Christian stewards, we agree that God created everything, that it still belongs to God, and that he gave it to us to be his stewards and care for it. If that is, in fact, the case, whose money is it anyway? It’s God’s money, of course.
If it is God’s money and we are his stewards, we should change the way we think about how we use it. Rather than asking “How much of my money should I give away?” the question should be “How much of God’s money should I keep for myself?”
There are two Doctors of the Church who had something to say about that – St. Thomas Aquinas and St. Augustine.
St. Thomas Aquinas said, “Man should not consider his material possessions his own, but as common to all, so as to share them without hesitation when others are in need.” And St. Augustine said, “Find out how much God has given you and from it take what you need; the remainder is needed by others.”
This is no Marxist ideology being given here. Aquinas and Augustine are two of the most brilliant and influential theologians of the Church who are telling us that the material possessions we have do not belong to us at all. We are simply caretakers – stewards – who have the responsibility to share these possessions with our brothers and sisters in need.
Our next column will be the conclusion of our series about Treasure. If, as you finish this column, you are scratching your head about the relevance of Behavioral Finance to stewardship of treasure, it is our intention to tie it all together for you at that time. Stay tuned.
As always, thanks for reading. I would love to hear from you. Write to me at firstname.lastname@example.org; Check out our blog radicaljoy.blog/