National Catholic Register

Culture of Life

Business Boom?

Family Matters

BY Phil Lenahan

June 14-20, 2009 Issue | Posted 6/5/09 at 2:03 PM

 

I’m a Catholic entrepreneur. Is it okay to strive for “sky’s-the-limit” growth — or should I be more modest about my business goals?

A steward of Providence has the responsibility to create wealth. That’s something you don’t hear very often, but it’s true. Section 2404 of the Catechism says, “The ownership of any property makes its holder a steward of Providence, with the task of making it fruitful and communicating its benefits to others, first of all his family.” The phrase with the task of making it fruitful includes the responsibility for creating wealth.

The responsibility for wealth creation is also described in the parable of the talents in Matthew 25:14-30. In this story, the two servants who grow the talents they have been given are commended and given more. The servant who buries his talent is chastised. The message is clear: The Lord wants us to grow the resources we have. Why? So we can provide for our families and assist with the needs of others.

Pope Benedict recently touched on the responsibility we have to create wealth while speaking about the issue of poverty. He said that trying to solve the problem of poverty solely by redistribution of existing wealth is indulging in an “illusion.” He continued by calling wealth creation “an inescapable duty, which must be kept in mind if the fight against material poverty is to be effective in the long run.”

There are many paths to creating wealth, but the key is to have a multiplier effect. Entrepreneurs start and grow businesses. They develop a business model, prove the effectiveness of that model and then expand it. Just think Starbucks.

Entrepreneurs make up only a small percentage of the population. As a result, wealth creation for most people will result from steadily saving and investing a portion of their salary over a long period of time. In this case, the multiplier effect is “compound earnings.” Einstein called compound earnings the greatest mathematical discovery of all time.

Here’s one example of how it works. Paul and Ann save $2,000 every year for 10 years, starting when they’re 25. While they stop making additional contributions after the first decade, they allow the investment balance to grow at 10% until they retire when they reach the age of 65. At that point, Paul and Ann’s investments have grown to $677,000.

Let’s look at another example. John and Carol don’t start saving until they’re 35. They contribute $2,000 per year for 30 years, so they actually contribute $60,000 — three times the amount that Paul and Ann did. Their investments also grow at 10% each year. But since they started 10 years later, their invested savings couldn’t catch up to Paul and Ann’s. They ended up with only $377,000.

That is the power of compound earnings. To obtain its benefits, you need to save and invest consistently from an early age and obtain a reasonable rate of return for the level of risk appropriate for you.

It’s an interesting paradox. Stewards of Providence are called to create wealth, yet the Lord’s admonitions about attachments to money remain as true as ever. So the challenge is to use our talents to create wealth, while remaining detached from that wealth. (You don’t want to love money, thus making an idol of it, and you should only use it for good purposes.) Keeping that balance is a challenge, but a mature Christian is up to the task.

God love you!

Phil Lenahan is online at

VeritasFinancialMinistries.com.