The Holistic Balance Sheet - edited

I spend most of my days in conversations with people about things that matter deeply to them. Commonly, we will develop and work from their “balance sheet”. However, most of us initially think only in terms of a financial balance sheet – the one with financial assets on one side and liabilities on the other. It’s an important and helpful tool to be sure. But I work from a different balance sheet – I call it “The Holistic Balance Sheet”.

If I asked you to develop your own balance sheet, you’d start by thinking of the things you own. Your home, 401K balance, business interests and automobiles come to mind pretty quickly. You may or may not readily know the value of each of these. But you can fairly easily identify the key items. They are the ones that have the biggest price tags – the most zeroes after the dollar sign, right? Or are they?

Once you’ve racked your brain trying to identify all the assets in your possession, I’d ask, “Have you truly identified the most important things? Is there anything more important than the things you have listed on the left side? Is there anything you wouldn’t trade for the things you have listed?” And usually there is. It may take a while, but you’d get the point. You may respond, “My family, my friends, my faith, my education, my experiences, my health, my … you-fill-in-the-blank.”

At our core, we recognize that “money” isn’t the only thing that matters. Often, its value is far less than important relationships, health and experiences. But most of us forget this from time to time. Don’t we?

So why is so little time, energy, worry, attention, planning, accountability is given to these non-financial assets – the really important ones? Successful business owners, professionals and executives can often fall into the deepest traps. Living in a world of metrics, financial statements, billable hours and profitability margins, attention goes to career and to financial matters. What gets attention, often gets results.

But at what expense? What relationships don’t get the attention they should – spouse, kids, self? By ignoring or devaluing our health or relationships or very soul, how can we expect our holistic net worth to continue to grow? And even when we find success in many areas of our lives (work, health, family), is there something missing? Something we always wanted to do – a dream we gave up on – a difference we hope to make later on in life? We may not get the time.

Chances are that if you’ve found some measure of success in this world you’ve done some planning. You’ve participated in the situational analysis and strategic plan for your business. You’ve created a retirement and estate plan. We do those things because we value them. And we know that they will appreciate in value by thoughtful intentional attention.

Yet it is rare indeed to see “the most important things” integrated into these plans. When is the last time you did a situational analysis on YOU – your health, your relationships, your spiritual connection, your unfulfilled dreams? Is it written down? And have you developed a plan for how to bridge the gaps between where you are and where you want to be?

Valuing the things on the left side of the balance sheet enough to write them down is the first step. Consciously growing them is the next. And that involves the right side of the balance sheet.

Liabilities, debts, taxes due, etc. occupy the rights side of most balance sheets. They are considered the “have to’s” of life. They aren’t much fun for most of us – uninspiring at best; ominous, at worst.

In my holistic balance sheet, I define this section differently. The term I use is “contribution” – or “choose to’s”. I can’t deny the reality that taxes and debts exist. I can choose how I view these things and other important financial and non-financial “obligations” though. I do have a choice in whether I pay them – even taxes – as long as I’m willing to pay the consequences.

When I make a contribution to my financial assets, I expect a return or dividend. I may not always get one – or at least not the one I expect. But I do it in anticipation of a brighter future. I take on debt for my business or my residence because I believe they will allow me to build more value on the left side than they represent on the right side. These are contributions – “choose to’s”.

Likewise, I make right-side contributions that correspond to the other left-side “assets”. Contributions to the “emotional bank account” in each of my human relationships help me better appreciate key people in my life. In turn, they better appreciate me. Quality time with our partners, spouses, children, and friends is a contribution. Exercising is a contribution to my health. Involvement is a contribution to my community and to my life experiences.

I wouldn’t trade my experiences and the wisdom I’ve gained from them for anything. I’ve known business people who have made and lost fortunes. They tell me that they were just as “wealthy” while bankrupt as they were when they were flush with cash. The reason they say is because they have an even richer experience of how to rebuild the wealth the next time.

To be sure, this is not the typical static, snapshot-in-time balance sheet from my old accounting texts. In fact, it is quite dynamic. Some financial purists would surely argue that I’m mixing balance sheet terms with income statement terms and throwing in some spiritual mumbo jumbo to boot. Yup! That’s why I call it a holistic balance sheet.

The dynamic piece in all this is that each contribution from the right side increases the value on the left. The currency may not be U.S. Dollars. It may be deepened friendships, magnified love, greater sense of community, or the remarkable learning that only comes from temporary failure. The value of the assets grows. We may not always notice it. We may in fact be totally oblivious to the growth. It grows just the same.

And it grows best when we contribute generously. The more I contribute to my 401K, the more it will grow in the long-run – despite temporary setbacks due to stock market fluctuations. The more time I spend with my son doing what he wants to do, the richer our relationship will be as we grow older. The more involved I choose to be in my community, the more I’ll appreciate it and enjoy the experiences.

A quick look around the world presents tragedy after tragedy. Economic uncertainty abounds. If I base my attitude on my retirement plan balance or my short-term income projections, I could choose to be depressed. But why would I look at only one aspect – the least important aspect – of my holistic balance sheet? I have a beautiful family, decent health and a community that nurtures my soul by reminding me that I’m part of something bigger than myself. I am blessed indeed. I suspect that most of us would have to admit the same.

The left sides of our balance sheets abound with riches most of the world can’t even imagine. Some of us appear wealthy financially, yet are impoverished in our relationships. Some bask in untold richness of unique experiences that rest of us may never know – unless we ask. None of us has everything we might wish for – and that’s probably a good thing. Yet each of us has much for which to be thankful. And by continuing to invest and to reinvest, we can continue to grow our own balance sheets. By doing it together, perhaps we can build the holistic health and wealth of the world.