Any good financial advisor will tell of the importance of diversifying your portfolio. Putting all of our money into one investment leaves us vulnerable to risk. To protect ourselves, we diversify, investing some of our holdings in riskier investments and some in more stable investments. This is the safest way to see our assets grow in a relatively safe way.
Kol Birke is a friend of mine and fellow graduate of the Applied Positive Psychology program at UPenn. His job (he is a “financial behavior specialist” for the Commonwealth Financial Network,) is to advise financial advisors, and he teaches them all about diversification. But he doesn’t teach them about financial diversification (they already know all about that.) He teaches them about diversification of well-being. It is hard to help a client boost their financial status, without seeing how their well-being is spread across the other areas of their life.
Kol has developed a free tool (available for download here) that he and some of his advisors use to get their clients thinking “beyond just their finances.” When clients talk to a financial advisor they might find themselves giving too much importance to their financial wellbeing without considering how it relates to other goals. But Kol wants to see his clients diversify their wellbeing, especially when they are planning ahead. “It’s like having multiple legs on your chair,” he says, “so if one gets kicked out due to life circumstances, you still have other legs to stand on.”
Almost none of Kol’s conversations are about finances, but the financial aspect is present in everything. He prefers to help clients with goal attainment. To achieve their goals they need clear vision, willpower, and “waypower.” The client needs to have a clear vision about what they want and the willpower to do what needs to be done to get there. The advisor will help with the waypower – the “how” to achieve those goals.
I recently wrote about the Gallup organization’s new book, “Wellbeing: The Five Essential Elements,” (see my article here) to help consumers develop a diversified portfolio of well-being. Rather than focusing on wealth development, they identified five elements of well-being, each of which is important for overall health and happiness: career wellbeing, social wellbeing, financial wellbeing, physical wellbeing and community wellbeing. They also provide (included with each new copy of the book) their own online survey tool to help you measure your wellbeing across all categories (just like the charts that would accompany a brokerage account statement to show how diversified the investments are.)
For each domain of wellbeing, the book devotes a section to providing tips and suggestions for how to increase wellbeing in that area. Increase community wellbeing by spending six hours a day with friends and family in enjoyable social activities. Increase career wellbeing by using your strengths at work, etc. The only problem is, while the book has a section on how we spend our time, it doesn’t provide practical advice to help you budget your time across all of the areas of wellbeing. When you can’t do it all, should you spend an hour to go to the gym, or spend an hour socializing with friends? How do you prioritize?
I spoke with author Tom Rath about this issue, (he is a fellow Master of Applied Positive Psychology alumnus, the head of the workplace consulting business with Gallup, and is also the author of “How Full Is Your Bucket? Positive Strategies for Work and Life”, “StrengthsFinder 2.0”, and “Strengths-Based Leadership.” From his experience, the people who are really flourishing are those who have high scores across all areas, not just one or two. So it’s important to work on all of them and not let one falter for the sake of another. I also suspect that working on any area of wellbeing will give a boost across all of the others (eg. Going to the gym will not only help your physicial wellbeing but your social life and your career as well.)
For a more detailed and comprehensive look at wellbeing diversification, I would suggest reading “Happiness: Unlocking the Mysteries of Psychological Wealth” by the father-son team of positive psychologists, Ed Diener and Robert Biswas-Diener. Their book gives a more comprehensive look at the research on the subject, although it doesn’t provide the nifty online tool for measuring and tracking your own wellbeing portfolio.
Regardless of which book you read or which tool you use, diversification of wellbeing is important. But wellbeing investment is like economic investment in another way: even more important than diversifying is simply starting to contribute to your investments to let them grow. Sometimes we waste too much time trying to decide the right investment to make rather than just taking a next step, however small that might be, towards living a better life.
References and recommended reading:
Rath, T. & Harter, J. K. (2010). Wellbeing: The Five Essential Elements. Gallup Press.
Diener, D. & Biswas-Diener, R. (2008). Happiness: Unlocking the Mysteries of Psychological Wealth. Wiley-Blackwell.