Net Worth

‘Worth: a measure of value for an item’. No description could seem less humanizing. SELF worth is a measure of value, usefulness or validity that we PLACE on ourselves. In order to create this construct in our psyche, there must be something with which we compare ourselves. This is where the rubber meets the road.

For those of us who choose to compare ourselves to others, we use extrinsic factors such as other people’s approval, attractiveness, academics, etc. to stack rank ourselves against our competition. This creates instability in the level of confidence in our self worth. When this eventually turns to self doubt, our feelings of inadequacy and failure begin to invade our psyche and can cause depression, stress, substance abuse, and other unsavory consequences.

In contrast, those of us who choose to compare ourselves only to our prescribed SELF worthiness, use intrinsic factors such as morals, faith, and internal merit to judge our growth, achievements, and to create our own success story. This creates a more consistent and stable level of confidence in our self worth, whereby small wins compound over time, the new self ever-better than before.

Net worth can be affected by our self worth. Net worth is defined as all assets (financial and non-financial) owned by an individual or business, minus all debts and liabilities. Net worth and self worth are so analogous we could really look at them interchangeably. One relates to the internal, human value and one relates to the external, economic value.

What reigns true for comparison of the self certainly manifests in the same way with our finances. When we look in our neighbor’s driveway to see a shiny new SUV or hear a co-worker discuss the new pool being installed or a luxury vacation on the horizon, it is easy to begin comparing our lives. We may think, “how is it possible for this person to be able to afford this or I should be able to do these things too”.

Then, instead of comparing our financial standing with our own PLANS, we begin making decisions about our finances based on the comparison or stack rank to those around us. The real danger with this thought process is not only that we are now completely derailed from our plan, but we are entering into a competition we will NEVER win.

The irony is that our economic value or net worth has absolutely nothing to do with a shiny car, an expensive vacation nor swimming pool. Net worth has to do with the amount of “economic currency” we own. Why is it important to have economic currency? The answer is simple: financial independence.

Financial independence is our ability to live life the way we choose. To have the power to live the life we desire, take care of those we love, and to have the freedom to do it the way we want to. It alleviates working a job we hate or living in a place we would rather not, sending our children to schools we are not satisfied with, and any number of subpar life choices.

Over the years, we have seen our debts and assets listed on various forms, namely when applying for mortgages. We always knew the numbers, but we did not aggregate the accounts or pay much attention to the difference between the two groups until we became part of the FI (financial independence) community. This was when we learned why our net worth was so important and once we did, we immediately sign up for a free Personal Capital account.

What we discovered was that our net worth was one of the key factors in calculating both the amount of money we need to retire and how much time it would take to get there. Once we learned the formulas and began running our own calculations, EVERYTHING changed. We had been debt free (less the house) for a while, we had minimized our recurring expenses as low as we could, we travel hacked like a pro, lived a rich life as frugally as we could but we had not yet begun laser focusing on our retirement plan.

We could not believe how simple the math was, how quickly we discovered our retirement timeline and strategized our plan. Financial acumen has never been a struggle so it was baffling there was so much information we did not know. We are so excited to begin curating this overgrown forest of information into a beautiful bouquet of tools that anyone can put on display in their own financial house.

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