Since Fathom began this conversation about financial independence, or FI, the aim has always been to think critically and honestly to evaluate the FI thought and practice.
Lyndsey Medford’s piece challenges root assumptions in the FI philosophy, a philosophy I admire and seek to emulate. Her questions are valid, real, and worth engaging.
Is it moral to charge interest?
Medford acknowledges that lending at interest is foundational to FI, and that “the attitude in medieval times, as R. H. Tawney summarizes, was that lending at interest ‘is contrary to Scripture; it is contrary to Aristotle; it is contrary to nature.’”
On God and Money
To be sure, the Bible has some things to say about charging interest. In the Pentateuch, “If you lend money to my people, to the poor among you, you are not to act as a creditor to him; you shall not charge him interest” (Exodus 22:25), and also you are not to charge interest if your “countryman becomes poor and his means with regard to you falters” (Leviticus 25:35–37). The prophets carry on the same theme regarding interest, namely, don’t abuse the poor. Ezekiel 18 articulates the reproach on those who oppress the poor and abuse a position of power through lending.
In these contexts, charging interest is used as tool to oppress. Yet there are other instances when interest is considered a neutral or positive medium.
In the parable of the talents in Matthew 25, the foolish servant is rebuked: “Then you ought to have put my money in the bank, and on my arrival I would have received my money back with interest.” Scripture here is recognizing non-abusive lending at interest as a common and, perhaps, beneficial part of society.
From an economic perspective, lending at interest benefits everyone as a collective. It creates economic growth through leverage and expansion of resources. It allows those who lack means to buy a house, start a business, or gain an advanced degree. Done correctly, lending has the power to pull many out of poverty.
Can lending at interest be immoral? Absolutely. The credit card company that preys upon the needy or uneducated in order to lure them into interest rates of twenty to thirty percent are extortionist. But those actions don’t reflect the inherent nature of lending at interest.
Is making money without working immoral?
When you lend money at interest you will receive more money in return when the debt is fully repaid. Medford openly wonders whether making money without working is immoral. Or, specifically, is the FI ideal of living off a portfolio’s interests and growth immoral?
My response is to separate employment from work. Work does not equal paid employment. In fact, much of the work we do isn’t paid labor. Our society gains value through volunteer service and personal projects, not employment. The condemnation of 2 Thessalonians 3:10—“If anyone is not willing to work, let him not eat”—is laid upon the lazy, not the unemployed or retired. The person who abandons all work in favor of laziness or inactivity is immoral because it’s a rejection of Genesis 2:15.
A Theology of Financial Independence
A Case Study
I made a widget. In fact, I made ten of them last week. Today, I am going door-to-door selling them for $2 each yet they only cost $1 to make. These are amazing widgets, so after knocking on doors all morning, exchanging $2 for a widget, I am out of widgets. I made $20 revenue, $10 of which is profit. Next week I will take my $20 of revenue and build twenty widgets.
Of course I will get better at this. Widget building used to take me a while, but now I can turn out several quite quickly. And, well, going door to door is a lot of work, so perhaps I will just put up a sign in my front yard and allow my customers to come to me. Next week I will have twenty widgets, bring in $40 of revenue, and I could sit and sell from my front porch while sipping lemonade.
With a bit more work I built a machine that can make the widgets in much less time. Also, instead of sitting on my porch selling, my neighbors can now just order online. Initially, I spend a lot of time packaging the widgets for mailing, but I found out my nephew needed a summer job so now I pay him to package the product.
Am I making money without working? If the answer is yes, at what point did I stop? Did this business become immoral somewhere between selling handmade widgets door to door and building a machine and hiring my nephew?
There was work involved in making the original widgets, creating a profitable pricing structure, identifying and maximizing the market and then building efficiencies so that fifty hours a weeks becomes ten. I am getting paid for working hard and building a business that can sustain itself without substantial intervention. I am not “making money without working.”
Is the person who works eighty hours a week on a different moral or ethical plane than the person who works fifteen hours?
The above illustration is no different than building a nest egg and applying those funds to investments that provide a return. No longer are eighty hours required, but through efficiencies, I can work ten hours (mostly spent researching and managing investments). The question “Is it immoral to make money without working?” should unequivocally be answered in the affirmative. Yet, creating a business or investment portfolio (are those really different?) is hard work. Receiving benefit from that work and the efficiencies created is moral.
Why be financially independent?
But, should we profit off companies and industries that are immoral?
Each of the above puzzle pieces points toward a concluding question. Should we profit off companies and industries that operate in immoral ways?
Medford writes, “And for theologians at the beginning of the Renaissance, the answer to questionable investing was also a resounding ‘no.’ . . . it would be unjust to finance others’ immoral activities. And while we may not be directly financing others’ immoral activities, we may be participating in it to some degree when we make our investments.”
Initially, I mentioned credit card companies charging obscene interest rates on late payments as an example of immoral lending. Is it immoral for me to own a small share of that company and therefore profit off their extortionist type interest gains? I would be profiting off their gains through my shareholding, even if in minuscule or indirect ways.
But this issues is not isolated to investing, because all of our consumerist practices are at stake. If it is immoral to profit off these industries through the stock market, surely it is also immoral to aid and advance their work as a consumer.
Should I to invest in healthcare? Can I visit hospitals or buy prescriptions? Should I profit off investing in tech? Do we still get to have a Facebook account or use Gmail? Can I support the financial industry? Am I allowed to have a bank account at Chase or a credit card through Visa?
If we aim to tip our moral compass toward the purest north, we land in isolation—a monk, ascetic, or societal separatist. The brokenness of this world is inescapable without complete rejection.
Welcome to the call of a disciple. Welcome to a broken world. We can reject anything with a taint, aiming to be out of the world so as not to be of it. Or we choose to live in the milieu. It’s messy and I don’t really like it. I can’t find funds or ethical companies to shop and invest with, nor is it likely that a rubber stamped company would truly not lose some leaves in the breeze. If we can’t find perfection, what do we do?
You seek wisdom and operate within your conscious. You could lean into financial niches like Socially Responsible Investing (SRI) that collects a basket of stocks from companies with ethical behaviors toward society. But with limited options and sliding opinions or standards for morality, you may find little relief. Realize also that your dollars have greater impact on companies as a consumer than as an investor in third-party stock market trade.
I am not trying to excuse or cop-out of my responsibility as an investor and consumer. Black and white rules often have too many exceptions. We must admit that an economy composed of sinful people is inherently broken, and at the very least believers need to engage.
In the End
There are many ways to live that fall within the bounds of a godly life. Whether one seeks financial independence to free up time to minister to others, or whether one seeks financial dependence to free up capital to invest money in others, the two must align with a good heart and a pure faith.
Cover image by Carlos Muza.