personal finance

Facing Moral Dilemmas in Personal Finance? Think Less to Act Right

It “makes the world go ‘round,” as the saying goes, but money is also fraught with questions of morality. Major religions call upon their followers to turn away from the pursuit of material things. The moralization also comes from secular sources: Benjamin Franklin, for instance, considered frugality a virtue.

Sometimes, we can feel conflicted about striving to improve our financial situation. If this moral and ethical dilemma seems to be holding you back from taking the right steps in terms of personal finance, less deliberation could be the solution.

A history of moral dilemmas

There is a long history of the association of money with moral imperatives. In medieval times, the Catholic Church prohibited usury yet tolerated a similar practice called ‘zinskauf’ as it was considered a sale rather than a loan.

This led Martin Luther to call out such instruments as obeying only the letter of the law and not its spirit. The moral conflict about money was thus deeply intertwined with the Reformation, and eventually the rise of a more modern economic system founded on individualist ethics of labor and business.

Muslim leaders also sought to intervene in the free market through the application of sharia law. Unlike in Catholicism, their financial principles were based on equating personal honor with credit.

A Muslim merchant needed a reputation for honesty, and investors had to have skin in the game. To this day, forex brokers have separate Islamic accounts for their clients whose religious beliefs don’t permit earning or payment of interest.

With the rise of capitalism, secular thought leaders began to question the wisdom of a system that permits an elite few to accrue wealth and generally encourages excessive material consumption.

In some cases, governments have stepped in to regulate monopolies by the likes of Standard Oil and Microsoft. But on an individual level, people are largely left to follow their own moral compass.

A question of honor

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In some cases, making that call is a no-brainer. People who live below the poverty line, for instance, mustn’t feel guilty about devoting more time and energy towards whatever occupation helps them to earn a living.

But for many, the ethical issues surrounding how we acquire and dispense with money only add to an already complex problem of managing our personal finances better.

To simplify our thinking, we might ask: what is money? And why have authorities throughout history attempted to intervene or to associate it with sin?

Suppose you wish to acquire an item or service from a friend or are already indebted to them for the same. You would be honor-bound to make a payment to them in some form, not necessarily with money. They might accept like deeds or items, or something else they consider of equivalent value.

But when this transaction occurs outside the friendship context, it becomes difficult to find a mutually acceptable form of payment between strangers. Money, backed by a creditable authority such as the local government, bridges that gap. Creditors know that they can exchange it in separate transactions for other goods and services.

Yet even as money enables transactions between strangers, it can’t seem to escape that association of being a matter of honor.

Thinking less on morality

Seen from this perspective, the premise of morality in money matters is loose at best. Are you somehow an evil person for accruing money, which represents the debt of total strangers?

And while you do have an obligation to settle personal debts, delay or failure to do so shouldn’t make you dishonorable in general. It just means you’re bad at financial management.

The axis of money morality today mirrors our growing social inequality. As the rich get richer and everyone beneath gets squeezed out, it’s those at the top who have the incentive to insist that the poor pay their debts.

Adding the burden of morality to every man’s financial decisions only makes their struggles more difficult. They are admonished against seeking ways to build their own wealth, told to live within their means, and hounded to settle outstanding debts.

If doing the right thing matters to you, think less on the matter. Neuroscientists have found that a specific area of the brain processes the conflicts between moral and material motives.

When this region is less stimulated, we default to moral behavior, even in the face of considerable financial incentives to the contrary.

Deliberate less on what’s right or wrong in your decisions involving personal finance. It will actually improve your ability to take actions that align with your values without clouding your rational judgment.

In turn, this will free you to make sensible choices and improve your financial practices without feeling guilty about it.

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