Foundations of Positive Psychology

Wealth management principles from positive psychology

A life well lived is a wealthy life

The findings of Positive Psychology suggest at least three principles that are core aspects of our approach to personal wealth management.

They are:

1. Money is a means to an end, not an end in itself

Research indicates that a pursuit of wealth and its trappings for their own sake is unlikely to result in life satisfaction. Also, it is important to realise that maximising wealth may be a poor proxy for maximising life satisfaction.

Therefore, we believe that effective wealth management requires you to first examine and articulate what is important to you in life (i.e. your lifestyle objectives) and then consider what, if anything, may need to change financially for those objectives to be achieved. To blindly pursue increased wealth without first asking “what for?” is really putting the cart before the horse.

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2. Use your strengths, let go of your weaknesses

Positive psychology suggests you will increase your life satisfaction by organising all aspects of your life – your work, play, parenting, relationships, community etc – so that you can effectively use your signature strengths.

A corollary is that you should avoid or delegate tasks that don’t use your strengths. Even though you may be effective in such tasks, persevering will not result in the flow or engagement that the positive psychologists claim is so critical to enjoying “the good life”.

Together with the “Understand opportunity cost” principle, this principle implies that for many people both their wealth and life satisfaction may suffer if they decide to become do it yourself wealth managers.

3. True wealth goes beyond money

We believe that you are truly wealthy if you live a “full life”, in the sense described by Positive Psychology. This is a concept well beyond monetary wealth. In fact, once a comfortable standard of living is achieved, the pursuit of life satisfaction and the pursuit of monetary wealth are unrelated.

Most people want to live better, more satisfying lives. Positive psychology tells us that we are more likely to achieve this goal if we use our signature strengths not only for our direct benefit but also for a purpose that we regard as bigger and beyond us.

Monetary wealth used for a greater purpose provides the potential to live the “meaningful life” and to become truly wealthy. However, monetary wealth that is solely directed to enhancing the “Pleasant Life” is unlikely to offer any prospect for greater life satisfaction.

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