Written by Austin Pryor of Sound Mind Investing
Two-thirds of baby-boomers will inherit family money over their lifetimes, according to research by the Boston College Center for Retirement Research, amounting to the tidy sum of some $7.6 trillion! But inheritors are up against some surprising history: They’re likely to blow it. Family wealth rarely survives for long as it gets handed down. Research shows 70 percent is spent or lost by the end of the second generation, and 90 percent by the end of the third.
The culprits? Uncontrolled spending. Undue investment risk-taking. Poor business decisions. Self-destructive lifestyle choices. Family disharmony and infighting caused by greed for more of the family fortune. The wealth-management industry (yes, there is an entire industry dedicated to helping the rich stay rich) clearly has its hands full. Those who inherit large sums may have wealth at their disposal, but that doesn’t mean they know how to live well.
A high quality of life can be difficult to come by even though we live in the most affluent society in all of history. Why? Perhaps it’s because our society has steadily moved away from the Judeo-Christian ethic upon which our country was founded. Consider the differences between society’s prevailing attitudes toward life, work, family, and money versus the historical biblical view. Society and government’s perspective is that we came into existence strictly by chance. Accordingly, we are simply animals seeking to fulfill our needs. Furthermore:
Because there is no ultimate purpose or morality, we are free to invent our own. There are no absolutes. Ethical considerations are relative and personal, and they generally play little, if any, role in making career and lifestyle decisions.
The goal of work is to do whatever is necessary to achieve “success.” Indicators of success are tangible—money, possessions, and influence.
Because life is short, lifestyles are geared to immediate gratification—gaining as much pleasure as possible as quickly as possible. (This leads to higher consumption now and less saving for the future. A high level of debt and continuous use of credit is an acceptable means to this end.)
Because time is of the essence, investing choices gravitate to get-rich-sooner strategies with a short-term time horizon. Greed is a common (and understandable) motivator. Economic recessions are dreaded because they thwart progress toward financial abundance.
Contrast these views with a biblical perspective that maintains we are essentially spirit beings with an eternal purpose, and we came into existence through the creative hand of God. It follows that:
Because God has a moral purpose for His creation, an unavoidable law of sowing and reaping prevails. Ethics are based on Biblical wisdom and should play an important role in guiding career and lifestyle decisions.
The goal of work is to use our God-given talents to serve others or fulfill a calling. Indicators of success are often intangible—peace with God, showing love for others, and contentment in life.
Because eternal life awaits, a lifestyle of deferred gratification that is focused on eternal issues is appropriate. (This leads to less consumption now, generating more saving for the future and for giving to Christian ministry. A high level of debt and continuous use of credit is discouraged as an unnatural and enslaving lifestyle.)
Our investing choices can be geared to slow-but-sure strategies with a long-term time horizon. Greed is an unacceptable motivator. Recessions are accepted as unavoidable, and prepared for through a strategy of saving and diversification.
Jesus is almost universally regarded as the wisest moral teacher of all time, even by millions who don’t consider themselves Christians. At the end of what we call “The Sermon on the Mount,” He said, “Everyone who hears these words of mine and does not put them into practice is like a foolish man who built his house on sand. The rain came down, the streams rose, and the winds blew and beat against that house, and it fell with a great crash.”
Our society and government may ignore His words, but at the personal and family level we still can choose to prepare for the inevitable storms of life by following biblical precepts. Take a good look around you. Rarely has the truth of the old hymn been so obvious: “On Christ, the solid Rock, I stand. All other ground is sinking sand, all other ground is sinking sand.”