Applying Positive Psychology to Financial Planning


Money itself is nothing more than printed paper or a digital number on a computer. Too many people get emotionally busy trying to get a number in their bank account and lose track of the true meaning of money – a medium of exchange for things like vacations, college, college, etc. helping others, spending time with loved ones, etc. . The list goes on.

You need to identify those things in life that you want money to support. Money itself is seldom the goal. In fact, I would say that people’s lives can be broken down into 5 distinct areas that contribute to their happiness and fulfillment in life. These are career, relationships, self-care, altruism and spirituality.

When it comes to general well-being and contentment in life, all of these areas of your life need to evolve in harmony. Have you ever had a conflict with someone you are close to and then tried to compartmentalize them at work? Or have you ever been on a family vacation and been distracted by constant work emails? If you have experienced either or the other, you will understand how all areas of life really relate, no matter how good you are at compartmentalizing your life.

Therefore, understanding what is important to you in these 5 areas will be helpful when making plans.

Assessment: Are you on the right track to achieve the right goals?

Now is the time to check your current financial path and identify how it aligns with your short and long term life goals. Some may find that they were pursuing monetary goals that will have no effect on improving their well-being. We are taught that more money equals more happiness, but this is not necessarily the case. Studies show that an individual salary of $ 75,000 per year satisfies emotional well-being, but that there is no progress beyond an annual income of $ 75,000.1

That said, before we can determine if we are on the right track, we need to establish our life goals that bring us more well-being and fulfillment. While it may seem like an easy task, you will find that “happiness” can be an ambiguous term and difficult to quantify outside of the obvious things that bring positive emotions into your life. Because we need specificity when it comes to making plans, we need to look to the latest factual research in the field of positive psychology to help us.

Martin Seligman, the father of the positive psychology movement, developed the PERMA model to help us understand what exactly happiness means and how to create well-being in our lives. PERMA stands for Ppositive emotions, Ecommitment, Rrelations, Mmeaning, and Aproduction. Below we will assess each of these areas and how we might fit them into our life plan.

Positive emotions: These are the things that evoke the positive emotions most synonymous with happiness, like buying that new car, going on a trip and winning this award.

Commitment: These are the activities that you lose track of how much time to do or do after a stressful day / week to “reset” yourself, such as exercise, a hobby, or even your job.

Relationships: These are the things you do to foster deeper relationships with your family, loved ones, and friends.

Sense: What things do you do that make you meaningful or serve others and / or a higher purpose? Some find this by working their job, mentoring, donating, volunteering for a charity, etc.

Achievement: These are things around which we set goals and take action to achieve them. Our society encourages and rewards achievement during the early stages of life (school, sport, etc.), but many forget that it must be maintained to continue the feeling of well-being. As an adult, accomplishments can include running marathons, receiving promotions, or even achieving a new personal best in the gym.

Next steps

Write down the things you are currently doing in each of these areas and determine how much time and money you are spending in this activity. Research suggests that those with a more even distribution across the 5 categories2 experience significantly more well-being in life and tend to thrive more than those who do not. Once you’ve established your baseline, write down what you would do to strengthen each area of ​​PERMA in your life if money wasn’t an issue. Those are your real goals worth making a financial plan.

Hire a professional to assess your financial trajectory toward these new goals while examining your current habits and non-monetary trajectories in different areas of your life. This will highlight any opportunities for improvement or course correction around which the plan should be built.

The bottom line

As President Dwight D. Eisenhower once said, “Plans are nothing. Planning is everything.

This planning process goes far beyond developing a financial plan to bring you to an end point. This holistic approach will allow you to discover your unique pattern of well-being in life, as opposed to a simple plan for more legal tender. By finding those things that bring eudaimonia and creating steps to reach them in your life, you can find an infinite flame and completely change the reason you wake up in the morning.

Michael Foley, CFP, CSLP, is a full financial advisor at North Star Resource Group and provides complimentary, no-obligation student loan advice to medical professionals in training. Contact him at [email protected] or at 480-993-9491.

The references

1. Kahneman D, Deaton A. High income improves assessment of life but not emotional well-being. Proc Natl Acad Sci United States. 2010; 107 (38): 16489-16493; doi: 10.1073 / pnas.1011492107

2. Kern ML, Waters LE, Adler A, White MA. A multidimensional approach to measuring student well-being: application of the PERMA framework. J Posit Psychol. 2015; 10 (3): 262-271. doi: 10.1080 / 17439760.2014.936962


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