In the early days of blogging, the Rational Walk was an easy entry to investing. Focusing on Buffett and Berkshire, they made an intimidating topic accessible.
One of their suggestions was to track net worth (this was early in my education in finance and investing). Rather than income or savings, net worth was how much a person was actually worth. It was the proper way. The intelligent way. And who doesn’t want that?
So I tracked it.
It’s been great! To see a number rise thanks to mortgage payments, investing gains, and raises feels wonderful. It doesn’t go up every time, but the number goes up over time.
However, like a lot of numbers, it provides a false sense of authority. It’s just a number, and it has two problems.
First, it’s not cash. Our net worth includes a house, 401k, and brokerage accounts. To convert all to spendable money is a task. Selling a house is an ordeal, a 401k included penalties up to a certain age, and brokerage accounts need liquidity. Someone has to buy what a person is selling. Plus, you know, crypto.
Second, it’s not the solution. Money may lead to a solution, but it’s not the goal. This is the heart of one of my favorite books, that there are many creative ways to live well and we stink at coming up with them! We can pay for services – or do them ourselves. The latter just takes some time and the right YouTube instructions.
It’s nice to be reminded of these things. Life is dynamic and asks for balance. Have things boiled down to a number? It might not help, but it’s probably not the answer.
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