Yesterday, I wrote an article on how to accelerate the growth of your net worth. From top to bottom, the article is chock full of great personal finance advice, and if you follow all of it, I virtually guarantee that the growth of your net worth will accelerate over time.
There’s one big piece missing from that puzzle, though. Why?
Why exactly are you hunting for acceleration in your net worth? What do you want to do with that money? When your net worth is accelerating, what good will it do you?
For some, simply watching that number grow is enough. It can become a representation of one’s life efforts, a clear indication that a person has worked hard and made wise choices with his or her money. Being a millionaire or a multi-millionaire might just be a label that a person really strives for and derives great value from, and there’s nothing wrong with that.
For me, though, the labels that really matter are father. Husband. Community leader. Friend. Writer. Things like that. Those are the labels I am interested in having. Those are the labels I want people to use when they talk about me.
None of those have anything directly to do with money.
For me, the reason for thinking about and improving my net worth is to make me better at all of those other labels that I care much more about. I worry about my financial picture because I know that having a good financial foundation makes me a better father. It makes me a better husband. It makes me a better community leader. It makes me a better friend. It makes me a better writer.
Having a healthy emergency fund, no debt, and some money saved for retirement means I’m not worried about making sure that my kids have food to eat. I know that they will have the educational resources they need, and that they’ll be able to participate in any activities that they so choose.
Having a healthy emergency fund, no debt, and some money saved for retirement means that if something unexpected happens to my wife, things will be okay. Whether it’s a job loss or an unexpected illness or a marital concern, we will be able to be at each other’s side and focus on overcoming that problem, not on financial concerns.
Having a healthy emergency fund, no debt, and some money saved for retirement means that, in the moment, I can truly focus on being a friend or being a community leader without any sort of financial stress or concern diverting my attention.
Having a healthy emergency fund, no debt, and some money saved for retirement means that I can take some career leaps that I might not otherwise be able to take, because I know our financial state can survive a downturn in income for a while if things don’t turn out well.
In short, a financial foundation isn’t meaningful on its own; a financial foundation is meaningful because of how it supports other areas of your life and opens new doors in those areas.
When I step back and calculate my net worth and see how it has grown over the last several months, it unquestionably feels good, but that “good” feeling comes from knowing that the areas of my life that I truly care about are secure and well supported and that security grows all the time.
Furthermore, financial success means more and more opportunities in those areas are now available to me. I can honestly consider ideas like taking a year off from work to write a novel and shepherd it through the publishing process. I can envision scenarios that might otherwise seem disastrous – like a serious illness for my wife that causes her to leave work for a while – that our family can now just roll through. I don’t have to worry about financial apocalypse if one of our children struggles with their choices after high school – we’re ready to handle whatever may come.
Money is not a purpose in and of itself. Money is a foundation that enables security and opportunity in all of the areas of life that you care most about. To me, that’s the reason to care about your net worth, to shoot for growing your financial foundation, and to be proud of the positive direction you’re taking.
In one simple number, my net worth is a symbol of my day-to-day commitment to those things I care most deeply about. Our net worth is going up because I’m making daily choices to ensure that it keeps moving that way, and because it is going up, I know that those areas of my life that I care about are secure and strong and can withstand unexpected events and surprising choices.
How much is too much? For me, the answer to that question is pretty simple as well. I know that I’ve put too much emphasis on accumulating wealth and not enough in the other areas of my life when I look at that balance and honestly regret things left undone. I don’t really have that feeling at all – sure, I can think of a thing or two that I might have done differently, but there’s nothing that truly fills me with regret. There is no aspect of our financial turnaround, as of yet, where I look at our financial state and think, “Gee, I wish I had done this other thing instead of building this backbone of security and springboard of opportunity.”
There will probably come a time in my life when I do feel that way, and that’s a point at which I need to do some serious reflection about my financial choices going forward. Are there now things that I can do with this financial foundation that weren’t possible before, things that enable me to really live out those core things and core roles that I value?
All I can say is that it’s not yet happened in any significant way, and I don’t see it happening any time soon.
In the end, it all comes down to one simple idea: the purpose of your life isn’t to make more money. The purpose of your life is to figure out who you want to be in this world, and then use your personal finances to maximize those roles.
I want to be a good father, a good husband, a good friend, a community leader, and a good writer. I want to be known as a listener, as a person who helps out and leads when needed, as a person with worthwhile ideas.
Personal finance success merely helps me do all of those roles as well as possible. When I make choices that help out my finances, I reinforce all of those roles. When I make bad financial choices, I undermine all of those roles.
The purpose of your life isn’t to be financially successful. It’s to be personally successful, and financial success goes a long way toward propping up that kind of personal success.