Simple Living, Dave Ramsey, and Personal Finance for Christians

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NOVEMBER 2012: ESSAY

by Martha LaBarge and Todd Steen

In the wake of the recent economic crisis, many Americans have found themselves in dire financial straits. Our financial decisions have resulted in crippling credit card debt, huge stockpiles of consumer purchases, and an epidemic of underwater mortgages. As the baby-boom generation ages, few have saved enough to finance their retirement.

Christians are relatively indistinguishable from non-Christians in terms of personal finance decisions. We struggle to make ends meet. We worry and argue about money. In many cases money becomes the primary focus of our lives. The Bible has much to say on the topic of money, but it has not received significant attention in our pulpits or in church education. While there is a substantial lack of knowledge about personal finance in our society, Christians have failed to take the lead or to set ourselves apart from secular society regarding this important topic.

A few voices have spoken on the question of how Christians should conduct their personal finances. One of these voices, which comes from a variety of sources, extols a simple lifestyle, promoting an asceticism that aims to let others “simply live” while also placing a high value on minimizing our impact on the planet. Another Christian voice, that of writer and radio show host Dave Ramsey, suggests self-denial in the present that will allow us to be debt-free and to enjoy great material wealth later in life.

Both voices have merit. Efforts to live simply take into consideration the needs of others, while Ramsey’s call to eliminate debt allows for long-term financial freedom that includes being free to give more to others. But both of these Christian financial lifestyles also have the potential to shift our focus away from the wisdom of scripture. As stewards, we need to actively assess these views in the light of biblical direction. Our financial decisions affect not only our own financial lives, both present and future, but also the lives of all those with whom we interact. Our decisions are a testament to the place money has in our lives, and a testament to the place God has in our lives. How then should we spend and save?

LIVING SIMPLY

It is unclear who first coined the phrase “Live simply so others may simply live,” but it certainly has been repeated often in sermons and articles and conversations. Those who extol living more simply typically have the best of motives, usually rooted in deep religious or moral convictions.

A commitment to a simple lifestyle can manifest itself in a variety of ways. It usually involves spending less money, downsizing one’s possessions, and spending more time with people. It may also mean increasing self-sufficiency, working less, or being less tied to modern technology. The motivation may be to create more time for volunteer activities, to reduce the stresses that money can bring, to care for creation, or to encourage independence from the economy. Proponents almost always believe that by maintaining a simple lifestyle they will make more space for others to have the goods they need and will preserve the earth for future generations.

“Live simply so others may simply live.” It seems so, well, simple. If we consume a lot, we take away the ability of others to consume. But if we slow down our consumption and either make less income or give more away, we make room for others to consume and have the things they need to survive. One simple-lifestyle proponent at thegoodhuman.com offers this example: “Giving money to charity instead of splurging on yourself once in a while enables a kid in some far away land to get a textbook.” In other words, even though the connection may not be immediate or direct, all of our financial decisions, big and small, have implications for others.

In this way of thinking, our economy is regarded in some ways as a zerosum game where our actions to purchase and consume goods diminish the possibilities of others to do the same. While this may be true in a few cases, this type of thinking is contrary to the reality of how economies actually work. When we spend, we provide opportunities for businesspeople and their employees to support themselves. This applies both to domestic spending and to our spending on goods that are produced overseas. Every dollar we spend provides income for its recipient, who generally then spends most of it at another person’s place of employment. Our consumption is the engine of an economy that provides jobs and encourages entrepreneurs to start new businesses. A substantial cause of our current recession is that consumers are spending less than they spent in the past.

If we would all adopt a lower consumption level, hoping to leave more of the economic pie for others, the pie would actually end up shrinking in size. If everyone were to consume less, then companies would contract and jobs would be lost, forcing those who are unemployed to consume even less. While increased saving and decreased consumption can be a wise choice for an individual or a family, if everyone were to do it, the result over time would be a substantially weakened economy. In economics this is known as “the paradox of thrift.”

Certainly the choice for a simple lifestyle is a legitimate one, and we don’t suggest that people should refrain from it. Living simply attempts to respond to the overwhelming materialism and consumerism that is present in our society. We don’t believe, however, that simple lifestyles are the norm for everyone, especially with regard to reducing consumption. There is no direct link between reducing consumption and increasing the economic well-being of the poor in our country and throughout the world. Targeting our consumption in a way that emphasizes stewardship and justice may be much more effective.

LIVING “LIKE NO ONE ELSE”

Dave Ramsey is one of America’s most popular personal financial advisors, and he has become particularly influential among evangelical Christians. His popularity is apparent from the success of his radio show, nationally syndicated columns, books, and speaking appearances. Ramsey has also gained recognition through his Financial Peace University courses, which are offered by many churches, community organizations, and other nonprofit groups.

While in some ways the prescriptions of Dave Ramsey may seem similar to those suggesting simpler lifestyles, Ramsey’s teaching counsels a pattern of austerity and saving in the present so that one can enjoy a life of abundance in the future. His mantra, “If you will live like no one else, later you can live (and give) like no one else,” encourages families to minimize current spending and to escape all forms of debt so that they will eventually be able to build wealth (including the capacity to give generously) in a way that is unmatched by most.

In his latest book, The Total Money Makeover, Ramsey suggests seven “baby steps” to achieving financial fitness, urging readers to emulate millionaires in order to become millionaires themselves. According to Ramsey, the millionaire does not live beyond her means; therefore, neither should we. “Wants” are delayed to a time when they can be paid for in cash and all debt has been eliminated. College degrees are wants and are not a reason to go into debt. Included in his “baby steps” are saving for emergencies, saving for retirement, saving for college, and eliminating all debt, including credit card debt, college loans, car loans, and finally even mortgage debt. Given the widespread indebtedness of many American families, Ramsey’s recommendations certainly seem timely, and it is difficult to argue with either the success stories that are included in Total Money Makeover or the popularity of his radio show. He has helped many people out of financial distress, to be sure.

But while Ramsey’s advice may help some followers get on sure financial footing, is his understanding of stewardship defined broadly enough? Does his focus on individuals and money neglect our involvement with community and the stewardship of our time? For example, instead of taking on a second job in order to reduce debt, perhaps one would want to consider whether it may be more important to spend time with family. The needs of others may be ignored when the focus is totally on our own finances. Even though Ramsey does counsel charitable acts, his emphasis on a goal of future material abundance can distract us from the wide implications of stewardship and generosity.

SCRIPTURAL GUIDANCE

Scripture provides us with many insights about our personal financial decisions. Our overall approach to personal finance needs to be directed by the reality that everything we have comes from the hand of God. Although we own things in a legal and earthly sense, the truth is that we are really just stewards of God’s possessions. This biblical teaching requires a change in attitude toward how we accumulate and dispose of assets. With all that we have, we serve God’s kingdom. The writer of Proverbs anticipates our forgetfulness about our responsibilities: “Give me neither poverty nor riches. . . . Otherwise, I may have too much and disown you and say, ‘Who is the Lord?'” (Proverbs 30:8-9). At the same time, God’s command to Adam and Eve and all humanity is to develop God’s creation and all of the potential that is in it. This positive “cultural mandate” of Genesis 1 directs us to grow what is good as we are created to be fruitful.

Within the central concept of stewardship, there are several other biblical perspectives that are relevant for our personal finances. Provision for our families is a key reason God provides us with resources. Paul writes to Timothy that “anyone who does not provide for their relatives, and especially for their own household, has denied the faith and is worse than an unbeliever” (1 Timothy 5:8). This is a hard teaching, and we can imagine many situations where people through no fault of their own are unable to provide for their own family. It also does not obviate the need for charity or government support systems to help those in need. However, this passage does highlight that care for our families should be a central aspect in our personal financial decision making.

Because all that we have belongs to God, we also need to share what we have with others with an open hand and heart. Paul exhorts us to “sow bountifully,” saying that “God loves a cheerful giver” (2 Corinthians 9:6–7). This clearly includes our giving to charity, but it also means directing our purchases toward businesses that treat their workers well, that show concern for creation, and that use their resources wisely. We need to find creative ways to assist our neighbors who are working to support their families, ways that foster independence. Steve Corbett and Brian Fikkert’s book, When Helping Hurts, is a useful resource in helping us understand why many of our efforts to aid the poor can actually be counterproductive.

Scripture also tells us that planning for the future is a positive and necessary activity. From the Genesis story of Joseph setting aside grain for a future drought and the Proverbs 6 description of the ant storing up its provisions, we see the wisdom and foresight of saving for an uncertain future. Yet we are also told to put our future in God’s hands and not to worry about it, for “who of you by worrying [about the future] can add a single hour to your life?” (Matthew 6:27). This is a delicate balance to attain, but we can remember our Lord’s admonition not to build up treasure on earth but instead to build up treasure in heaven.

While we engage in all sorts of economic activity, the accumulation of wealth shouldn’t be the focus of our lives. Proverbs 11:28 says, “Whoever trusts in his riches will fall, but the righteous will thrive like a green leaf.” 1 Timothy 6:9–10 states that “people who want to get rich fall into temptation and a trap and into many foolish and harmful desires that plunge people into ruin and destruction. For the love of money is a root of all kinds of evil.” Jesus has warned us to “Watch out! Be on your guard against all kinds of greed; life does not consist in an abundance of possessions” (Luke 12:15).

How do these biblical messages come together in our personal finances? We are to be faithful stewards, mindful of our status as God’s agents, growing what is good in the world, responsible to our families and others. Our resources provide us with an opportunity to obey God’s Word and participate in the blessings and joy of obedience. We need to use foresight to envision the future, as we seek to wisely balance both material and nonmaterial things. Through all of this we need to love our neighbors as ourselves, share with those less fortunate than ourselves, and realize that our personal finances can easily become an idol. This is a tall order indeed, one that requires much more thought and effort than Christians usually apply. But what a great responsibility and gift this is!

AN EVALUATION

How do the above-mentioned approaches to personal finance—living simply and Ramsey’s counsel of delayed gratification—stand up in the light of these biblical concepts? Both approaches have commendable aspects, but each also has some significant shortcomings.

It is too easy to embrace the idea that “living simply” discharges all of our responsibilities to be good stewards. If we see consumption as primarily negative, we may end up doing very little to support businesses that provide employment. We may neglect to promote the growth and development of the good potential of God’s creation, a growth that has lifted much of the world out of poverty. In addition, simple lifestyles are difficult to maintain over the long haul. It is easy to slip from asceticism into materialism. After practicing simplicity for a time, we may begin to think that we then deserve material possessions, that we have earned the right to indulge ourselves. The slide from simplicity to materialism can cause us to bypass the lifelong struggle to be active stewards.

Dave Ramsey’s philosophy of delayed gratification, alternatively, has the potential to put the eventual accumulation of material goods at the center of our lives. Financial decisions are evaluated by the measure of how they will remove us from debt and lead to future material prosperity. Living a life of faithful stewardship, both material and nonmaterial, may be thwarted by attempts to follow the purported economic patterns of millionaires. For instance, a choice to support a growing business with one’s purchases (especially when its products are more expensive than can be found elsewhere) may not meet Ramsey’s test of reducing debt. His followers may decide to pass up opportunities to accumulate useful human capital if it involves taking out a student loan, for example. Taking a risk and borrowing in order to begin a business (the genesis of most of our economy’s employment) can become an act of economic irresponsibility.

How then shall we spend? We believe that economic activity is a good part of God’s creation. We also believe that all of our personal financial decisions have implications beyond our own families. Spending our money is an important act that provides utility for our families and also allows for the productivity of others. It should not be minimized merely for the sake of reducing our consumption or for maximizing our consumption in the future. In addition, every dollar we spend is a vote either for a company that is a good steward or for one that is not. When we spend our money, we should support, wherever possible, those companies that treat both their workers and God’s creation well, while providing a fair return to their owners.

CONCLUSION

In his influential book Rich Christians in an Age of Hunger, Ron Sider asserts that “Jesus calls us to a joyful life of carefree unconcern for possessions.” In our hyper-materialistic society, many would echo this call as the proper attitude Christians should have concerning material things. Certainly we must not make an idol out of our possessions. However, Sider’s idea assumes that material things are not a good part of God’s creation. Instead we must live a joyful life of careful concern and gratitude for our wealth and possessions. Material wealth and goods are a gift and a trust from the Lord. We are responsible to use them in a way that brings glory to God. If we are faithful stewards, these gifts allow us to provide for our families and to improve the well-being of others. Our personal finances are not merely personal, and our economic decisions are not merely economic or financial.

We are not counseling an acceptance of unthinking materialism, where an invisible hand will somehow bring about the goals of stewardship and justice that we desire. Instead, we call for an active and intentional stewardship in all of our economic activity, recognizing that our purchases, in addition to the benefits and usefulness they provide to us, provide employment and opportunity for others. If we, as Christians, don’t care about our wealth and possessions, we end up abdicating the economic influence and power that is our moral responsibility. All of our economic activity is accountable to God, to our families, and to our neighbors. In all that we earn, spend, save, or give, we must try to promote shalom, a true flourishing of the creation and of the relationships between ourselves, God, and our neighbors.

Martha LaBarge teaches accounting and Todd Steen teaches economics at Hope College in Holland, Michigan.