Net Worth and Self Worth
It's time for a confession: I feel better about myself when my net worth is up.
That may not be a shocking statement, but the corollary is really the problem: am I less of a person when net worth goes down? Why do I feel doubts when the stock market drops, or the checking account gets too low?
The issue is tying self worth to net worth.
Net worth is not cash flow - we should be clear on the distinction. You don't use your 401(k) to buy groceries, or at least you shouldn't. Cash flow is new money coming in each month, such as a paycheck from your work or a dividend from stocks you own or income from rental property.
But we do need to detach our opinion of our worth from how much money we have. It's just wrong thinking, but it's so prevalent and powerful in our society.
What do you feel when you see an expensive car pass you? How about when you see someone checking their mail in front of a mansion? Do you feel less of yourself?
These are just erroneous thoughts but powerful nonetheless.
What is the impact?
1. Stress and poor mental health. If we tie our worth to the stock market or other investment, it's like riding an emotional roller coaster.
2. Strain on relationships. Do you earn more or less than your spouse? That can affect the relationship? Are you the high earner or the low earner among your peers?
3. Fear of failure. If business turns down, are you less of a person? Of course not. But we all struggle with self-doubt when we see red ink on our balance at the bank or mutual fund.
4. Desire to spend to keep up the illusion. This doesn't need much explanation, but the availability of a credit card plus the need to spend to validate self worth are a dangerous combination.
So what should we do? There may not be a simple answer for everyone. Probably the best solution may be the hardest to implement: self reflection. If you catch yourself with these recurring thoughts, a good first step is to stop and reflect. Take some time away from the situation, talk to a friend, anything you can do to break the cycle.
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Disclaimer: The views expressed on this website reflect the personal opinions and experiences of the writer. Nothing in this article constitutes financial advice in any way. Information on this website should not be relied upon for investment or business advice. Please consult with a qualified financial professional before making any financial decisions. 3800279