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The Fallacy of Faith-Based Financial Planning

Faith Based

Faith-based financial planners often base their recommendations on their religion - not on reality and logic. One faith-based financial planning organization even goes on to assume that "money is on loan from God." Every financial decision is filtered through their particular religion - in this case Christianity. But this can have disastrous consequences.

Financial planning has nothing to do with religion and neither do financial markets. In fact, in the Christian religion, the making of money is seen as sinful. And, the rich are shunned for having earned their wealth. For example, according to the Bible:

James 5:1 –

Go to now, ye rich men, weep and howl for your miseries that shall come upon you.

Luke 6:24 –

But woe unto you that are rich! for ye have received your consolation.

Luke 16:19-25 –

There was a certain rich man, which was clothed in purple and fine linen, and fared sumptuously every day: And there was a certain beggar named Lazarus, which was laid at his gate, full of sores, And desiring to be fed with the crumbs which fell from the rich man's table: moreover the dogs came and licked his sores. And it came to pass, that the beggar died, and was carried by the angels into Abraham's bosom: the rich man also died, and was buried; And in hell he lift up his eyes, being in torments, and seeth Abraham afar off, and Lazarus in his bosom. And he cried and said, Father Abraham, have mercy on me, and send Lazarus, that he may dip the tip of his finger in water, and cool my tongue; for I am tormented in this flame. But Abraham said, Son, remember that thou in thy lifetime receivedst thy good things, and likewise Lazarus evil things: but now he is comforted, and thou art tormented.

Matthew 19:23-24 -

Then said Jesus unto his disciples, Verily I say unto you, That a rich man shall hardly enter into the kingdom of heaven. And again I say unto you, It is easier for a camel to go through the eye of a needle, than for a rich man to enter into the kingdom of God.

Moreover, faith-based investing (which faith-based planners sometimes call "values-based investing") grew out of the socially responsible investing movement of the 1970s. It fails to work better than a rational approach to investing for the same reasons. A financial plan must be based in reality in order for it to work. Moreover, there must be a profit motive. By adopting a faith-based approach, you may end up sacrificing profits and missing your financial goals. Is it worth it?

For example, a successful investment strategy depends on the rational evaluation of a company and its management. The profits do not come from the prophets - they come from the company and its ability to maximize profits by adhering to capitalistic principles. And no amount of wishing - that is to say no amount of faith - will affect the strength of the company or its profits.

You also shouldn't forgo an investment in a company if it runs contrary to the Bible. In fact, you must set aside and ignore many of the passages in the Bible in order to become financially successful and still feel good about yourself.

This entry was posted on May 7th, 2008 by David C Lewis, RFC. Edits may have been made to keep this entry current. · No Comments · Philosophy In Financial Planning

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