A Wealth of Well-Being

Leslie Griffy
14 Jan 2025

Humans are motivated by all kinds of things. Sure, financial well-being, built on a foundation of money, is one motivator. But having a lot of money is no guarantee for overall well-being. This is not a groundbreaking concept, but it does shift the focus of the world of finance.

SCU’s Leavey School of Business Glenn Klimek Professor of Finance Meir Statman has long advocated for bringing real human wants and behavior to the forefront of an industry that often glosses over humans as whole persons. In his newest book, A Wealth of Well-Being, Statman considers how we complicated humans balance the many domains of our lives, finances, family, friends, health, work, education, religion, and society, combining them to enhance our life well-being.

Santa Clara Magazine sat with the professor recently to dig into his findings on how we choose to live our lives and spend our money. The conversation has been edited for clarity and brevity.

Santa Clara Magazine: You’ve been looking into how behavior impacts financial decisions for decades. It is easy to take for granted that it wasn’t always this way.

Statman: When I started my university education in the late 1960s, finance was mostly mathematics about rational investors who aim only at maximizing their wealth. Beginning in the 1980s, scholars such as my Santa Clara colleague Hersh Shefrin and I moved away from describing investors as rational to describing them as irrational, misled from their pursuit of wealth by cognitive and emotional errors. For example, irrational investors trade too much, wasting wealth rather than adding to it. This was the beginning of behavioral finance.

SCM: How does behavioral finance better reflect people’s decision-making?

Statman: Look, you can get a perfectly good watch for $50. Or one for $5,000. They tell the same time. But shoppers of the $5,000 watch are also seeking expressive and emotional benefits. “What will people think of me? How will it make me feel?” Instead of calling such behavior irrational, I call it normal.

Thinking like this is expanding the circle of finance. We need financial well-being for life well-being, but it is life well-being that we seek.

SCM: What does that mean?

Statman: If I ask you what is most important in your life, you are likely to say family, friends, work, health, religion, education, and society. But we need money for all that. We cannot support a family without money. But money alone does not get us to life well-being.

There is a huge amount of literature on well-being in psychology, sociology, and economics, but it is largely unknown to people in finance. Academic findings are precise but dry. It was fun to breathe life into dry findings by adding real-life stories that illustrate them.

SCM: In A Wealth of Well-Being, you detail a number of things that influence financial and life well-being. I was particularly struck by how culture affects our behavior and well-being. Can you give me examples?

Statman: Think about dating and marriage. Arranged marriages—parents as matchmakers—are common among some cultures. For example, Orthodox Jews in the U.S., but not among secular Jews.

On American online dating sites people might say, “I want someone kind, with a sense a humor.” Americans care about money when choosing mates, but don’t speak about it directly. On Indian online dating sites, however, people speak about money more directly.

“This is expanding the circle of finance. We need financial well- being in life for life well-being, but it is life well-being that we seek.”

Arranged marriages can be wise. I have an Indian American friend who says, “Who knows me better than my parents? And my parents have my best interests in mind.” An Orthodox Jewish mother says, “this way my daughter would not have to kiss many frogs.” Speaking about her own marriage, she described going out on a few matchmaking dates before she met the right man. They met on a Friday, met twice in the following week, and were engaged by the next Friday. Now they are celebrating their 30th anniversary.

SCM: In the book, you delve into how we benefit from different kinds of capital—financial, but also social, cultural, and personal. How do these kinds of capital interact? For example, the book discusses research on how working-class and poor people tend to have strong ties to a small social group that they rely on for things like child care or a loan, whereas elite people are more likely to have many more ties, mostly weak ones.

Statman: Yes. People don’t always understand the social and financial circumstances of people in other social classes. A poor person might ask his brother for a loan to fix his car. An elite person will charge it on his credit card. But an elite person might call a college classmate who is now a CEO and ask for help when he has lost his job. Or call a classmate who is now a professor to ask about how to help her daughter be accepted to her dream school.

SCM: You write about life well-being as a portfolio of well-being in life domains. How do you balance it?

Statman: Life well-being portfolios resemble investment portfolios. There may be some exhilarating investments in an investment portfolio, but likely also some painful ones. We might dwell on the painful investments, letting them diminish our well-being. But it is wise to consider an investment portfolio as a whole, balancing the exhilarating with painful. The same is true in life well-being portfolios.

Our own pain is in the family domain, Barbara, our older daughter, is living with bipolar illness. For some years Navah, my wife, and I dwelled on that pain, diminishing our well-being in the parents and children part of our family domain, and also in the marriage part of that domain.

But we have learned to consider our life well-being portfolio as a whole. We are fortunate to have an ample finances domain, so we’re able to support Barbara without constraining our budget, and we are even more fortunate in the family domain, as Ruth, our younger daughter, loves her sister and supports her.

SCM: What do you want future finance students to learn?

Statman: I want students to know the science of finance. I want them to know how to choose investment projects if they are managers in companies and how to choose investments in portfolios. I want them to know how financial markets work, and how to determine the prices of options and futures. I want them to know how to overcome common cognitive errors, such as hindsight errors, and common emotional errors, such as excessive regret.

But I also want them to know how finance and financial well-being are related to life and life well-being. In one assignment I present an alphabetical list of 10 wants answering the question “Why is wealth important to you?” These include “Buying the things I really want,” “Educating my children,” “Helping the less fortunate,” and “Providing financial security.” I ask my students to rank the wants by importance to them and explain their rankings.

One wrote: “Providing financial security is right at the top of my list. It’s not just about me; it’s about my family’s journey and their struggles after the Vietnam War.” Another wrote: “Fourteen years ago, prior to the birth of my son, I would have put buying things for myself as my main goal. Now, my mind is centered on my son.”

I also ask my students how they manage their saving and spending. Do they find it hard to refrain from spending even when they know they shouldn’t spend? If they are in a relationship, how do they resolve differences about saving and spending? How do their parents manage their savings and spending? One student wrote that he is about to be married. His fiancée wants them to combine their finances but he prefers to keep them separate. “What do you think, professor?”

I see articles noting that families that have millions now can have billions in the future if they limit the number of children they have. This is absurd. People should not be the servants of money. Money should be the servant of people.

In his new book, Meir Statman explores a holistic approach to financial and life well-being.

“This is expanding the circle of finance. We need financial well- being in life for life well-being, but it is life well-being that we seek.”

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