The Humble Millionaire

I got stuck in a conversation at a dinner party last week with a name dropper. It was painful. I’m sure you’ve been in similar situations. Wanting to impress me, I suppose, I heard among other comments: “Yes, Janet Yellen and I are good friends. I’ll be traveling to DC soon and I’m looking forward to connecting.”

But it didn’t end there. I also heard about this person’s exotic travels and homes around the world. And the fabulous career that supported the lavish lifestyle. And the incredibly insightful views this person had on politics and other issues.

If I’d had the chance, I could have offered that I once met Janet Yellen at a Federal Reserve conference during the lunch break at a buffet table. I said “hello” to her and she said “hello” back.  Janet and I are close too.

I recount this experience not because I think narcissists can’t grow wealthy. They can and do. However, I would suggest it is not the good life we are intended to live on our path to prosperity.

My contention: look to the old fashion virtues of humility and stewardship and their correlation with wealth.

The Advantages of Humility

King Solomon’s Proverbs speak of this truth, “The outcome of humility and of the fear of the Lord is wealth, honor, and life.” How does this ancient wisdom speak to us in the 21^st century? Consider four ways.

First, humility in investing likely leads us to avoid big investment bets based on our own insights. If the market professionals can’t beat the averages, the humble investor will lean toward spreading money broadly, owning a globally diversified mix of stocks and bonds.

Second, humble investors will not assume high future returns, so we compensate by saving as much as we reasonably can.

Third, humility will move us to consider that no one guarantees us a long life. In order to protect those who depend on us, we will make sure they will be okay if something happens to us. This includes not only life and disability insurance, but also a well-designed estate plan to assist those who will carry on in our absence.

A fourth lesson of humility is made clear in the book The Millionaire Next Door. One of the observations is that you probably don’t recognize those who have become wealthy around you.

Unlike my dinner party friend, the humble millionaire doesn’t need to impress anyone with a show of wealth. They typically don’t want recognition for donations. And humility may lead them to drive older cars or less fashionable clothes, which leads to increased savings. A virtuous cycle exists in the lifestyle of the humble.

But humility alone is not enough to have a successful relationship with money. Stewardship provides the energy to become proactive and aggressive in managing our resources.

The Necessity of Stewardship with Humility

I did a number of radio interviews after Smart Money with Purpose came out. In one interview on a Christian radio, I was asked how I could encourage Christians to save money when Jesus taught that we should not lay up treasures on earth, but store them in heaven.

It’s a great question and I think there is only one answer for those of us in the Christian tradition. We don’t actually own anything in this life. Rather, we are stewards of what we have been given and must manage them accordingly.

When we adopt this belief, it changes everything about how we look at money. Here are three examples of how managing wealth as a steward is different from the view that our money is ours to do with as we please.

First, as a steward, we need to consider the most effective way the wealth we have can help others. The radio interviewer may have thought the best way to do that is to give all but essential money to churches or nonprofits. However, the evidence suggests otherwise.

World Bank estimates that more than one billion people have been lifted out of extreme poverty in the last 25 years. A realistic goal some have set is to erase almost all abject poverty in the world by 2030.

This incredibly good news is partly because of charitable efforts, but the bulk of the progress is made when people have access to capital in free markets.

To be clear, it’s good to give money to charitable ventures. They help many people that would otherwise be left out of a rising tide. But in the stewardship model of managing wealth, investments in businesses that employ people and provide goods and services is a virtuous choice. Since businesses are lifting more people out of poverty than any other efforts, it makes sense to have our money invested there.

Second, a humble person may be inclined to not negotiate a hard bargain for goods and services for himself. However, the good steward will negotiate furiously to get the best deal.

Sometimes I talk to Christians who think it is virtuous to not be aggressive in managing their career success. I advise them to change their thinking. The diligent steward will see maximizing their salary for their God given abilities as a part of good stewardship.

Third, the steward sees all of life as an opportunity to be faithful with the resources he or she has been given. Children are to be educated for future productivity. Money is to be grown in investments that serve others. Time is to be used productively with balance between the need for rest and the opportunities to work. And work or support of the nonprofit sector remains an important part of good stewardship.

What happens when humility and stewardship are not central to managing our resources? In the worst case, instead of seeing money as a tool to support a purposeful life, it becomes the thing we ascribe God like qualities too. That doesn’t end well. I find striving to maintain humility and stewardship concepts in money management to be the superior path.

Joe Kesler

Smart Money with Purpose