Are you to focused on money ?

Gary Alt |

Several years ago, I read a fascinating paper by a couple of psychology professors, Ed Diener and Martin Seligman. Their essay, “Beyond Money: Toward an Economy of Well-Being,” explores the complex relationship between income and happiness. It was originally targeted at policy-makers in government, corporations and other organizations, but I have found that their ideas apply directly to the work we do in families.   

In their essay, Diener and Seligman compare the level of life satisfaction for various groups around the world. The target groups were diverse and included, among others, people on the Forbes list of the 400 richest Americans, Maasai tribesmen in east Africa, and homeless people in Fresno, California.  People from each group were asked to indicate their level of agreement with the statement: "Are you satisfied with your life" using a scale from 1 (complete disagreement) to 7 (complete agreement.) 4 was a neutral rating.

It probably won’t surprise you to find that members of the Forbes 400 list topped the rankings with an average rating of 5.8. But I found it remarkable that the Maasai tribesmen scored nearly as high (5.7) — a group, who Diener and Selig point out are “a traditional herding people who have no electricity or running water, and who live in huts made of dung.” Homeless people in Fresno, in contrast, scored only 2.9.

Reflecting on their results, Diener and Seligman made the following point: “Many people feel that they would be happier if they had more income and additional material goods, and there is some mixed evidence to support this claim....But the effects of wealth are not large, and they are dwarfed by other influences, such as those of personality and social relationships.”

Other authors have written on this topic. James Hughes, Jr., in his book Family Wealth, describes three kinds of capital that need to be part of any successful plan: financial capital, human capital and social capital. In my experience, financial capital typically dominates the planning conversation while human and social capital are often overlooked.

Human capital refers to the individual's development as a complete person. Athletes acquire human capital as they build physical strength, agility and endurance. Artists increase their human capital as they learn techniques that allow them to express their insights into life and the world. Students accumulate human capital as they study and learn. You and I develop human capital as we strive to become wiser in our decision making, more self-reliant in our habits and lifestyle, and more firmly rooted spiritually and emotionally.

Social capital refers to a person's ability to relate constructively to the world around them. People rich in social capital are able to influence others in positive ways. Sometimes they are famous leaders like Abraham Lincoln or Winston Churchill or Gandhi, but more often they are quieter souls who inspire those around them to live better lives. Many of us have had parents or teachers or pastors who have played significant mentoring roles in our lives. Such individuals lift and inspire others because of their rich stores of social capital. We accumulate reserves of social capital by engaging in life and serving others.

As we think about preparing our families for the future (arguably the most important work we do in financial planning), we should focus on all three capital accounts. We obviously need to be wise financial stewards, but that alone will not ensure our families’ well-being. We need to develop rich reserves of human and social capital, as well.


Steven C. Merrell  MBA, CFP®, AIF® is a Partner at Monterey Private Wealth, Inc., a Wealth Management Firm in Monterey.   He welcomes questions that you may have concerning investments, taxes, retirement, or estate planning.  Send your questions to: Steve Merrell,   2340 Garden Road Suite 202, Monterey, CA  93940 or email them to: