The way we talk about money and investments sometimes implies that the best use for money is the creation of more money. We are told to save and invest in financial assets that will grow and compound over time and become an ever larger pile of money.
That approach can create great financial wealth over that time, but not much else.
What are some other types of investments that we can make that can create a more meaningful impact on our lives in non-financial ways?
Wealth includes richness in all areas of life, not only the financial.
Beyond (and before) financial assets, with which we are all familiar, there are undeniable human asset classes that make up our lives. We can invest in these human asset classes with both our money and non-money resources, and benefit from the non-financial returns they offer.
These human asset classes are Education, Experiences, Relationships, Family, Personal Well Being (Health), Spirituality, Community. This article will illustrate only three of these human asset classes (Education, Relationships, and Health), but the same principles can be applied to the rest of them.
Education
The first, most obvious type of non-financial asset is education. Education can be expensive and offers no guarantee of financial return, yet the knowledge gained from the investment can enrich someone significantly over their lifetime.
Some sorts of education can translate into financial return by qualifying someone for certain occupations, but there are other non-financial benefits from investing in education. Perhaps it introduces you to a new perspective, paradigm or person that changes your interaction with or understanding of the world thereafter. These examples of return on investment (ROI) are not easily quantified, unlike the financial, but they are undeniably important.
Relationships
Another example of a non-financial asset is relationships. Healthy relationships do not require any financial investment. Instead, investments in relationships can be made with other, innate resources, such as time, energy, focus, commitment, loyalty, camaraderie, empathy, etc.
By the application of any of these other forms of human currency one can invest in a relationship and increase their non-financial ROI. Money is one of our resources that can contribute toward our investments, but it is not nearly as abundant and renewable as those other human resources we all possess.
When you apply any of your finite resources toward something or someone in your life, it constitutes an investment.
When you increase your investment in something by applying more of your resources, you increase the chance of greater return. This is true of financial assets and non-financial assets.
Money can contribute toward investment in non-financial assets, but it cannot buy them outright, like it can with financial assets.
For instance, in the context of a healthy relationship, money cannot buy a friend or a partner. The initial investments in these relationships must be made with human currency such as time, energy, focus, care, etc. However, if money were used to buy a thoughtful gift, for example, that would constitute an investment in that relationship, as the money serves as an expression of another form of human currency, in this case, consideration or care.
From this perspective, money can be an expression of your other resources. This ability of money can be used to strengthen your investment in any of the human asset classes.
Health
For instance, buying a gym membership is an investment in your health. The money used is an expression of your commitment to your health. The real returns from that investment, however, will come from the combination of that commitment and another of your resources, effort. Money cannot buy your health, but it can contribute toward the creation of ROI of your health.
The sort of non-financial ROI you might expect from investments in your health might be more comfort in your body, the ability to enjoy more physical experiences, or a longer life, to name a few. The non-financial ROI you might expect from investments in your relationships might be a stronger emotional support system, a useful network of diverse people, or a lifelong partner or friend, among others.
If we forget about these other forms of non-financial investment and their benefits, our investments in our own lives are not diversified.
We may sacrifice too much investment in these human asset classes by an over-reliance on financial investment and return. The fallacy is that enough financial success can supplement those other non-financial benefits we all need.
While these non-financial returns are not as quantifiable as a quarterly stock dividend, they are essential to living a satisfied life.
As I said before, money is capable of strengthening or reinforcing investment in other human asset classes, but it cannot buy those other benefits outright. A multi-million dollar 401(k) when you retire cannot make your children young again or strengthen your knees enough to hike Machu Picchu. Those benefits can only come from regular investment in those human asset classes that can provide those benefits. Money can strengthen those investments, should you decide to make them, but it cannot replace them.
You cannot lose
The beautiful thing about these sorts of non-financial return is that they are much more abundant and predictable than financial return on financial assets. In other words, they have less downside risk.
When I invest in my education, for example, I can expect to benefit from the knowledge or new perspectives for the rest of my life. In investing terms, I cannot lose my principal on that investment. In fact, I can only increase my returns from that initial investment by applying that knowledge to my life in new ways and expanding it.
Likewise, with a healthy relationship, I cannot divest from that relationship, unless I commit a betrayal or some sort of irreparable disrespect. My relationship with another person can only grow over time (or, at worst, remain unchanged), and those benefits that each of us gain from the relationship can only grow greater and more certain.
The same thing cannot be said for the stocks and ETFs that we accumulate in our 401(k)s and IRAs. Those offer no guarantee of continued return, while a good friend or a healthy diet pay out every day.
What are you sacrificing?
The traditional conception of career and life tells us to make great sacrifices of our time and satisfaction in the prime of life for the sake of earning and accumulating more and more money. One day, it says, you will have enough to enjoy the benefits of your human assets.
The truth is: You have the resources today to invest in your assets and enjoy their benefits. Your resources and the returns that truly matter include more than just money. Real wealth includes investments in your non-financial assets and an understanding that non-financial ROI is as important as financial ROI.
After all, you are more than your net worth.
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