I often hear people talk about their “net worth.”
Every time I hear this term it makes me cringe.
Regular readers of this blog will know that I feel very strongly about the alignment of your money management habits with the values you hold highest in your life.
You need to be making smart money choices – not to just amass more and more money, but so you can live out your dream life by putting your money toward the things you truly care about.
The reason this is important is because the closer your spending habits align with your core principles and desires, the happier you’ll be.
When someone talks about their “Net Worth,” it shouldn’t be a discussion about how much money they have in their bank account, investment account, or the value of their real estate or businesses they own. When we equate our own self-worth to the amount of money we have, or even the income we earn, we are sending ourselves down a slippery slope.
THE PURPOSE OF WEALTH
In a previous episode of the Capable Wealth Podcast, I discussed the importance of understanding your personal “why” for investing and building wealth.
I believe building wealth isn’t about becoming wealthy – It’s about the things that wealth can afford you and the people around you. It’s about taking back control over your life and having the freedom to make your own choices without the limitations of being in a poor financial situation
You need to understand what you want in life, and then you can figure out how much wealth is required to live out that lifestyle.
Understanding the purpose of your wealth will go a long way toward helping you understand how much you actually need.
FAILING THROUGH COMPARISON
How often have you been having a conversation with a group of friends and someone will bring up so-and-so and how much money they are making. People will “ooo” and “ahh” about this like that person is automatically better than those who aren’t making that much money, or don’t have that much saved up.
The cliché example is a low-paying industry like teaching versus higher paying like engineering or law. Just because someone has made the choice to partake in a lower paying job doesn’t make them worth less than the person who pursued a higher-paying one.
There are a few problems when you start to equate your worth with the size of your bank account.
1 – There is always someone with more (well, unless your Jeff Bezos).
If your goal is to try and out-earn other people, you will forever be climbing up a mountain that you are unlikely to reach the top of. This isn’t a great way to set yourself up for success. No matter how well you are doing, you’ll be displeased because someone has more.
2 – If you equate your worth to money you won’t find happiness there.
How many stories have you heard about the rich and famous being miserable? Now, this could be for a lot of different reasons. But the point is that money isn’t going to make you happy and solve your problems. So don’t tie your personal significance and happiness to the amount of money you have.
3 – What happens if it all goes away?
There are countless stories about the super-rich losing it all. But what about the average joe who got sick and went bankrupt from medical bills?
If your foundation of self-worth is your bank account, and that bank account is taken away from you, what are you left with? It’s a scary thought.
For me, I like to think about my “worth” in terms of the impact I’m having on other’s lives. The more I can help others, the more “valuable” I am.
The fact that you’re reading this right now (and hopefully taking away something positive) means that my value is going up a little bit.
I think the word “worth” should be completely eliminated from the conversation when we are talking about ourselves and money. I’d prefer a term such as “Net Wealth.”
Do the things that make you happy. Try to bring happiness to other’s lives. And for goodness sake, use the money you are earning/saving to live your dream life; one that you are happy and proud of living.
I think if you do this you’ll find that you will stop comparing how much money you earn or have in the bank to those around you.
I think you’ll start to realize how awesome life can be when you start living your best life and stop comparing your life to someone else’s.