The net worth vs self worth conversation is an interesting one.
Before we get too deep, it’s important to define both.
Net worth is the amount by which your assets exceed your liabilities. It is the calculation made when considering an individual’s or a company’s monetary value.
It is the same calculation used to create the Forbes Rich List every year. It’s actually recalibrated daily and I just noticed Mark Zuckerberg lost $1B today. Poor bugger.
Self worth, according to the dictionary, is the sense of one’s own value or worth as a person. Think self esteem, or self respect.
Prioritising net worth vs self worth is different for everyone. Different cultures place a higher importance on one or the other. Even if you look at your own family, you’ll find everyone is placed at varying intervals along the net worth vs self worth continuum.
The importance of net worth
What would you be left with if you sold everything you own and paid off all debts?
This is your net worth. When you think about that number, how does it make you feel?
You might ponder what you could do with the cash. Perhaps you have enough to sell up and travel the world for a few years, then return, buy a place in the country and never work again.
Or like many others, your number may be a negative… or somewhere in between.
The concept of self-funded retirement for most people is brought about by selling their assets, and turning these into an income stream to replace the income earned from working. These are usually investment assets, and in Australia, we cash in our super and add this to the pile. You can’t count your own home in this calculation as you still need a place to live.
Net worth isn’t just about retirement. It provides you with the financial bandwidth to live the life you desire. The two keys are understanding what is sufficient for you and then knowing how to get there.
Side note – Your time to do something about this is now. Most young people don’t do enough early on, and you’re never too young to start. This is where partnering with the right financial adviser can add significant value.
The importance of self worth
The key difference between net worth vs self worth is that whilst self worth can have a money aspect to it, there are many other factors that weigh in on your own self value.
Some of these carry a far greater level of importance, even if we don’t realise it.
Factors that affect your own self worth will be strongly linked to what you value in life. They are many and varied for all of us but could include the work you do, your mental and physical wellbeing, your relationships, and your sense of purpose.
To figure out your own self worth, it is important to ensure you are inward looking. This is not a competition so stop comparing yourself to others and set your own definition for success.
Net worth vs self worth, and the winner is….
The key is having a balance and I don’t believe you can have one without the other.
The whole concept of the Sufficient Fundz platform is that money enables but it should never define.
In the work I do with my clients, we look at how important money is on the scale of everything else in your life and build a plan around all of these factors.
For me, self worth wins the net worth vs self worth argument every day. It is all-encompassing.
You need money for food, shelter, travel and almost everything else that’s important, but none of this means anything if you don’t value yourself highly in the other areas that matter to you.
If net worth is a factor that is higher on your scale it simply holds stronger weighting in your own self worth calculation.
Which is your winner?