Posted by Tim Stobbs on December 13, 2007
Despite our wishes to all get along in universal peace, there are always going to be arguments about things. For example, people start comparing things and then get upset by the results. A classic case came to mind this morning when I noticed a post over a Million Dollar Journey comparing PF bloggers net worths.
I give Frugal Trader credit that he also put up the ages of the people on the list to help assist people when comparing and a disclaimer that the calculations of each number might be a bit different. The danger of a list like this is when you start comparing yourself to someone else is not realizing what the detailed differences are.
Net worth is a bit of a slippery comparison method as each net worth will be completely different when you strip back the layers. For example, my own I know is heavily weighted by my house’s market value. So if I compare it to someone else who have more in stock and cash does it mean I’m worse off then they are? No, the fact is it doesn’t mean anything at all.
Everyone in life has a unique path financial speaking. Some have college paid by their parents, while others get student debts or skip going entirely. Some buy a house young and others wait or prefer to rent. Some have a couple of kids before they turn thirty and other don’t have they first until after thirty five. Each of these factors can have a huge impact on your net worth value and what makes up your net worth.
So when MoneySense magazine came out with their “wealth test” a few months ago I had a quick look at the results to see where my net worth compared. Generally speaking I didn’t really compare with the average person at all, but it doesn’t mean that the average person was wrong. We each choose to live our lives how we see fit and your net worth comes out of it. Also people have difference opportunities and skills which will define their net worth. For example, I don’t own many individual stocks, since I’ve never been that good at picking them until I did some reading on the subject, so now I’m trying.
In the end, your net worth is a number for you. It’s a sign post telling you your doing the right thing if it is going up on a year to year basis. If you do compare it to some one else, keep in mind the results could be meaningless if you looked into the details. Beware the dangers our comparing yourself to others, you might just end up releasing feelings of fear or envy.