Amanda Morrall says you should consider all kinds of wellbeing when it comes to financial matters

By Amanda Morrall

"Gross national product ... measures everything, in short, except that which makes life worthwhile." Robert F Kennedy in a speech at the University of Kansas, March 1968

Your physical, mental and emotional wellbeing may not feature on a budgeting spreadsheet, but in many ways they should – and the quote above from the late United States presidential candidate Robert F Kennedy touches on why.

GNP, or gross national product, is considered to be a measure of a country’s economic health or standard of living, and it’s based on the value of goods and services produced by a nation’s citizens in one year. Kennedy was basically saying that GNP alone is an inadequate measure of a nation’s true wellbeing.

In a similar way, I believe that an overflowing bank account is a poor gauge of a person’s happiness and personal wellbeing.

Personal finance involves a whole range of things outside of resolving debt, saving and budgeting.

An integrated personal finance plan will be one that takes stock of the emotional as well as the financial, and works towards goals that are meaningful and achievable for you personally.

Putting the life you want to live on hold while you grind out your days in a job you despise might allow you to power-save your way to early retirement. That’s fine as long as you can make peace with that plan and sacrifice some personal happiness while you wait to reach that golden destination.

My belief is that you should strive to find meaning, reward and passion in the present moment.

I say this for three reasons:

1. Life is too short not to live now.

2. Being in flow (being in tune with what you want and what makes you happy) will lead you more easily to change.

3. An imagined future where everything is peachy is merely an illusion.

Yes, plan to have enough money to enjoy the kind of lifestyle you want in retirement, but also make peace with the present moment – taking into account the people and the things in your life that add to its quality.

Material wants are never-ending, because human cravings are a bottomless pit of desire.

Temptations to buy are at every turn and if you can’t confront those consumer urges and walk away, you run the risk of being stuck in a vicious cycle of spending that will, in the long term, undermine your ability to save.

How do you do this?

By taking time out, literally, to reflect on your life. Consider what you have and don’t have, what you want and why, where you are now and where you want to go, how you’ll get there and who (if anyone) can help you along the way.

If you can see money for what it is – a means to an end rather than an end in itself – this will help you create a meaningful personal finance plan.

Your plan will undoubtedly require some sacrifice, creativity and willpower.

The key is to find your passion, harness your skills and intuition, and create a personal finance plan that’s an honest reflection of you and your goals.

It’s really only been in the last decade that economists and politicians have begun to recognise the inadequacy of GNP or GDP (gross domestic product, a related measure) as a reflection of a nation’s wellbeing.

Its biggest shortcoming is its failure to take into account changes in the human condition as a result of such a singular focus on economic growth. The assumption has always been that improved output and growth is good for a nation and good for its people.

When you compare the conditions of poor and rich nations, that assumption would seem to hold true. And yet some disturbing trends and uncomfortable truths challenge that belief.

Beyond a certain threshold of increased wealth, individuals aren’t any happier for their relatively high GDP per capita.

The question that’s now being asked (rather late in the game), is to what extent human happiness is affected by economic, monetary and trade policies modelled on the assumption that all growth is good. Where does the happiness and wellbeing of a nation factor into the equation?

Research in this area has led to proposals to introduce alternative metrics that aim to capture the emotional as well as the economic side of life.

How about a measure of ‘‘gross national happiness’’?

Two decades ago this might have been construed as new-age bunk, but its adoption is now being championed by some leading social scientists and Pulitzer Prize-winning economists. The growing acceptance of GDP’s inadequacy in improving the human condition has relevance in personal finance, too.

How? It’s a reminder that focusing exclusively on the numbers and the bottom line overlooks a whole range of other important factors that ultimately have a bearing on wellbeing.

Having a secure financial position, a welldiversified portfolio, rainy-day savings and a holiday fund won’t mean a lot if you’re miserable because other areas of your life are unfulfilled or neglected.

This is why financial advisers are increasingly moving towards a more holistic approach to personal finance, where quality is given as much weight as quantity.

Some people will dismiss that as rubbish, insisting that when you reach your financial goals, you will have the freedom, time and energy to pursue your passions and construct your ideal lifestyle. That works for some folk but not many. That’s because most people lack the discipline or the earning power to create the level of wealth necessary to do as they please.

These Generation-Y types who boast of passive incomes and online businesses that generate millions while they sleep (so they can travel the world jumping out of aeroplanes, climbing mountains and snorkelling) are few and far between.

How many people do you know who are in that position? I can think of only one person I know who is more or less retired at age 42 and has three mortgage-free properties around the world.

Get on the savings track early and manage your money well and it’s possible you can kiss goodbye to the boss at that age, too.

Realistically, most of us will work till the normal retirement age of 65 (which will shift to 67 within a decade, I reckon).

For that reason, it’s important to create a balanced financial plan that takes into account more than just numbers. Managing your finances in isolation from the rest of your life overlooks the importance of the thousands of daily decisions and moments that make up the stuff of life. What you do for a living, how you choose to spend your time, and the people you love all feed into the plan.

If you’re utterly miserable in your job or relationship or some other aspect of your life, then it’s hugely important to diagnose the real problems and work out a plan of action. Finance should be regarded as just one spoke in the wheel of wellbeing.

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Money Matters: Get Your Life and $$$ Sorted, by Amanda Morrall. Published by Penguin Group NZ. RRP $30.

interest.co.nz readers can buy this book online at the discounted price of $27.95 delivered. NZ addresses only.

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This article first appeared in The Press on April 4, 2013. It is used here with permission.