Personal finance isn’t all just about the best ways to save money and live frugally. There are other things to consider; other rules that should be followed. Some have absolutely nothing to do with saving money.Many of the posts here at Beating Broke deal with saving money, budgeting, and living frugally. On many occasions I have drummed on the amount of debt that we all take on and the ways that we can go about budgeting to make that debt go away. Deep in the root of that is a moral standard. I believe we have a moral responsibility to not spend more than we earn. And, because each dollar of debt, holds some risk of default, I believe we also have an ethical responsibility to budget so that we don’t default on our debt.
In the process of paying off our debt and saving money, many of us will be faced with a moral or ethical dilemma. Perhaps you bought a bunch of things at a department store and the teller didn’t notice that one of the items rang up for less than it was supposed to be. Or maybe the teller only rang up one item when there were really two. Many of us have been faced with just such a situation. And many of us, in our struggle to reduce our spending and debt, probably didn’t say a thing. I know I have. And I felt guilty about it. Morally, and ethically, we have a responsibility to pay the correct price for an item, and to pay for the correct amount of items. Even though I admit to not doing anything, I do try to keep myself honest. Ill gotten gains are gains you’re likely to lose. Call it karma, or whatever you like, you’ll feel the reverberations of your acts.
Perhaps more-so than in paying off debt and saving money, ethical and moral dilemmas can arise after we’ve paid it all off. Suddenly, we find ourselves with an abundance of spendable money that we can save or do what we want with. It’s not earmarked for any debt, and we’ve already paid ourselves. The situation has changed, but we still have a moral and ethical obligation to do what is right. If you’re investing your money, do you invest in so-called “sin stocks”? The stocks of cigarette and alcohol and other indiscretions. Again, I know I have. I am still a shareholder in the parent companies of both Marlboro and Camel. I’ve owned others in the past. Depending on how you feel about those companies, a ethical dilemma could come up. As a generality, those companies have rather solid stock and usually pay dividends. If you feel that those companies are responsible for cancer and death, can you ethically allow yourself to support them by becoming a share owner of that company?
As debtors, we all despise the credit card companies who charge double digit interest rates and hide fees around every corner. Banks too. As someone who can now invest money rather than paying those credit card companies and banks, deciding how we feel about those rates and fees can be another dilemma. If you’re one of the lucky ones whose state has allowed access to the peer-to-peer lending companies, you have the ability to invest in loans that carry rates that are very much the same as what a credit card company or bank would charge. The table has turned. If you were against it when you were paying the rates and fees, can you ethically charge them? Morally, should you?
I think that many of us look too closely at the technical aspects of personal finance. We study amortizations schedules and debt snowballs. We talk endlessly about our retirement funds and the ways that we are going to build them up. And, while it is there as an undercurrent, we sometimes fail to see the moral and ethical currents that run in the background. And sometimes, we allow our technical expertise and know-how overcome our moral and ethical compasses in order to make our debt snowball roll a bit faster.
If you truly want to win at personal finance, you have to find your moral and ethical limits and remain steadfast in their direction. We all fail to do that occasionally, but, as the old saying goes, you’ve got to get back up and try again.
I started this blog to share what I know and what I was learning about personal finance. Along the way I’ve met and found many blogging friends. Please feel free to connect with me on the Beating Broke accounts: Twitter and Facebook.
You can also connect with me personally at Novelnaut, Thatedeguy, Shane Ede, and my personal Twitter.
It’s important to always act with integrity and honesty. My husband used to put kids in the trunk at drive-ins so he didn’t have to pay and take ash trays from hotels before I met him
My refusal to do these things have changed him. Hopefully, it is possible or the ethical majority to influence those that are not.
Been reading for a few days now. This was very helpful and insightful information. BTW, I love your site design as well. I enjoyed reading it and hopefully you will write more soon. Do you have a newsletter? How do I subscribe to the blog itself?
What a wonderful post. I think you’re right that it’s easy to get caught up in the details of debt and savings and investment and not think about how what we’re doing fits in with our core values.
I’ve thought about the ethics of paying off my debt vs. defaulting vs. bankruptcy, and I’ve made the choice to pay off what I owe even though it’ll put me behind the 8-ball for a long time, credit-wise. I’ve been told I’m a perfect candidate for bankruptcy because of the kind of debt I have, but I just can’t bring myself to do it.
OTOH, I haven’t ever really thought about investing in terms of where I should invest based on my core values. I personally don’t have a problem investing in alcohol companies. I probably wouldn’t invest in tobacco companies. But what I haven’t thought to consider are things like companies that discriminate, or support social/political POV that I think are wrong, and so forth.
I’m also not sure where I stand on the whole peer-to-peer lending thing – it’s certainly something I’ve considered as an investment option when the time comes.
I’m definitely going to be putting more thought into these things!
Perspective makes things interesting. I could not be more in agreement with your post regarding ethics and morals and personal finance. But, it was not what I was expecting.
Your post addresses the individual responsibilities each of us should consider and ultimately commit to doing. But, that is one half of the equation. As a self-help, investment author and investment advisor, my perspective, when I saw the title, was that this column was about financial professionals. Everything you wrote applies to financial services professionals.
People should expect, at a bare minimum, honesty, integrity, transparency, and full disclosure from their banker or investment professionals. Although it may not seem like it, bankers and financial services professionals are human. They will make mistakes. But a return to a time when a person’s word was their bond would move our economy in a more consistently positive direction. I personally believe it begins with banks and financial services professionals committing to a higher standard than the fine print in a legal document.
It comes down to trust and trust must be earned and maintained. You wrote a great column! I just wanted to say that finding “moral and ethical limits and remain steadfast in their direction” also applies to those who earn their living in the financial services industry.
It’s about people, not money. When money becomes the focus, we all lose something. And that something is much more important than money.
Best regards,
Paul Puckett
Wow, I’ve genuinely never considered the moral implications of peer to peer lending interest rates. Do you have any control over them when you lend or are they set by the company?
It’s definitely a little painful to point out things like missed purchases when a cashier is ringing you up and you’re counting every penny – but I’ve found that if you can keep yourself honest when it’s hard like that, it’s a little easier once you’re debt free. It just becomes the way you do things.
Although, mentally I’m definitely guilty of this. Every time I catch the train home to visit my parents, I secretly hope the conductor won’t make it to me to punch my ticket, so I can use it next time.
This is great! I think when we are trying to fight the good fight of bettering our personal finances, this can be an easy line to cross if we’re not careful. Making sure our character is strong enough to withstand that is a true trial. And then, when we succeed at the financial side, hopefully we haven’t given up our soul to get there! Thanks for this excellent article!