[Please welcome Mr. 1500 Days today, as he stops by to drop some knowledge on net worth and why our community is so open to sharing theirs.]
Is the guy driving the fancy car wealthy? When I was a kid, I thought so. And I thought the same about my classmates whose parents took them on exotic vacations or lived in McMansions. I realize now that I had the wrong perception of wealth. Often, the luxury car or big home are the byproducts of insecurity or hedonic adaptation. These folks are only wealthy superficially; the driveway gets a new car every 3 years while the 401(k) sits neglected. .
What's Your Net Worth?
Just because I understand wealth doesn't mean that I'm any less obsessed with it. I admit to spending unhealthy amounts of time looking at the Rockstar Net Worth Tracker. It's fascinating to know someone's net worth and then investigate how it's reflected (or not reflected) in their lifestyle. , I received a record number of comments:
189 of them, actually.
While I think it's completely awesome that so many share their big number, I also wondered why they were so open. To find out, I came up with three questions and passed them around the personal finance blogger community.
Question #1: Why do you think the FI community is so incredibly open about their finances?
J.D. Roth (Money Boss): I think the FI/RE community is open about its finances because we recognize there's no real reason for the perennial taboo on the topic. I think people in the past were afraid to talk about money because they were (a) afraid to compare themselves to others and (b) didn't want to make others feel bad if they were lagging. But when you embrace and recognize the fundamental truth of the FI/RE movement -- that you only achieve financial independence through creating a HUGE gap between your earning and spending -- then you realize it doesn't make sense to stay silent. EVERYONE in the community (at least everyone serious) is working hard to maximize "profit" (as I call it). Now having said that, there's still a danger that can come from comparing ourselves to others. "I'm not saving as much as MMM!" Or, worse, "Mr. 1500's not serious because he does [fill in the blank]. He's not hardcore like ME." So, yes, we're open, and generally we're non-judgmental, but I do think even the FI/RE community can do with a little less dogmatism and a little more open-mindedness. J$ (Budgets Are Sexy): Every day I'm blown away at how open and willing our community is in sharing their #s with the world. I've been blogging for over 9 years now and we've gone from maybe one out of every 10 or 15 bloggers sharing it to over 25%! Which we now know because we're tracking it all in our new Blogger Directory. All the tricks and tips and thousands of other ways to manage your money is great, but seeing how it affects your money *in real time* when bloggers walk the walk is something entirely different. I'm in my 111th month in a row of sharing our numbers, and I'll continue to do so because it completely changed both my finances and my life those fateful 9 years ago. The more we're comfortable talking openly about this stuff the more everyone wins in the end. Mrs. PoP (Planting Our Pennies): I'm not sure we can really speak for others, but for Mr. PoP and I, the reason we're so open about our finances has probably changed over time. At first, the openness (we've been publishing our spending and net worth every month for nearly 5 years now!) was a big reason that we were able to stay on track financially. Instead of having tiny angels and devils sitting on our shoulders to consult for various purchases, from the moment we started publishing our spending on our blog, we knew we had frugal third-party eyes looking over our purchases every month and we didn't want to disappoint the people behind those frugal eyes! It really helped ingrain some of our spending tendencies as habit where they were more "stretch" goals when we started. So sharing that information was totally for our own benefit in those early years. But as we went along, I think our openness became less about what we gained from it and more about paying it forward. We were so motivated by financial bloggers who came before us and set the stage by dropping their financial drawers (like J$ who still does!) that we feel like we're doing a service by doing the same for others to see what one journey to financial independence looks like from month-to-month. Kate (Cashville Skyline): The personal finance blogger community is candid about their money because it's traditionally been such a taboo topic. By sharing details about our financial lives, we're starting an important conversation. Plus, it's juicy! Who wouldn't want to take a peek into someone's bank account? Ryan (Quietly Crushing It): Generally, I think most personal finance bloggers are just numbers geeks and love talking about this stuff. I would love to talk about anything personal finance related if people around me were actually interested. Michael (Financially Alert): I like seeing numbers, so I figure other people do too. If you don't have a reference point, you can't really measure yourself against anything. Furthermore, I think it's helpful to see my journey as it unfolds. There will be months that my numbers will be UP and others when it is DOWN. Some of this will be caused by market fluctuations, and other times I may just make some big mistakes. This just goes to illustrate that financial growth isn't necessarily a linear series of events. So, it's not necessary to worry about the bumps in the road as long as we keep our eyes looking ahead. Joe Udo (Retire by 40): I think it's the domino effect. After a few people share their finance, I felt more comfortable about sharing mine. I've shared our net worth in the past, but in general, I don't like sharing the net worth because it feels like showing off. I prefer to share my cash flow. That's more relate-able to casual readers. Mr. Tako (Mr. Tako Escapes): The internet provides a reasonable level of anonymity for the FI community. While nothing is completely anonymous, the vast majority of what's said and done on the internet is free from the very real repercussions of being open about finances. In real life, there would be very real consequences if you expose your finances to everyone. You could lose friends, get passed up for promotions at work, or even have your family/neighbors dislike you. Then there's always those people looking for a handout, or a free lunch. Who wants them hounding you all the time? A little anonymity is a good thing. Justin (Root of Good): I think people in the FI community are open to sharing net worth because it's an objective measure of the progress we are making toward our goals. The goals are all different and require different amounts of money because our FI budgets vary so much. Some aim to live on a half million while others think they need 3-to-10 million to enjoy FI!
Question #2: Why are you open about your finances?
Gen Y Finance Guy: I think as a PF blogger or anyone talking about money you need to put your money where your mouth is. It adds a significant level of context to the things I write about. I also think that people resonate with real numbers (I know I do). Imagine how may financial advisers would never get any business if they had to disclose their own financial situation. We all need accountability in our lives and, in my opinion, transparency is the best policy for achieving that. I also think that people have a natural curiosity of these kinds of details, especially since they are so taboo in the broader community. J.D. Roth (Money Boss): I'm open about MY personal finances because I'm open about everything. Some folks think I'm naive, but I've always been relatively trusting and sharing. It's a reflection of my intentional positive approach to life. I don't see what good it does to hide what I'm thinking and feeling and doing. Not everyone agrees with this approach, obviously, but there you go. So, I'm open about my finances because I think it helps my readers understand where I'm coming from. They get to see the things I do well -- and the things I struggle at. Kate (Cashville Skyline): I want to show others that building wealth is possible at all income levels. The secret to building your financial assets isn't necessarily earning a six-figure salary, it's consistently saving and investing. Ryan (Quietly Crushing It): First and foremost, it's self-serving. It allows a place for me to calculate my net worth on a monthly basis and see where changes are happening in my portfolio. Since it's public, I feel as though I need to get it out every month no matter what else is going on in my life. If it wasn't, I'd probably put it off. Seeing 5 figure moves on a given month is also very motivating. Secondly, transparency is proof that this all works (i.e. high savings rates, investing in low-cost index funds, and thinking about tax implications). Mr. Tako (Mr. Tako Escapes): Before I started my blog I spent a lot of time reading other FI blogs. There's a few good blogs out there, but a lot of it comes across as really fake stuff:
Want to know my secret to early retirement? Just buy my book! Take my online course and you too can boost your income in 90 days!
Basically a big money grab. How do we know those people are *really* financially independent? Honestly, we don't. I wanted to change a lot of that with my blog. The more *real* I can be, the better -- ugly blemishes and all. Sharing my net worth is part of that. There's just so much fake stuff on the internet. The more numbers and concrete details I can share about my FI life, the better I think it makes my blog. Has that translated into a massively successful blog with millions of readers? Nope, but being "real" and means more to me than filling my pockets further.
Question #3: Do you think it helps others by sharing your big number?****
J.D. Roth (Money Bo$S): I don't think MY big number necessarily helps readers. But seeing how I relate to that number does. Seeing that I'm in no rush to spend my $1.6 million, but instead try to enjoy a modest lifestyle -- and even struggle to keep my spending below a certain level -- can help them understand that money doesn't NEED to be spent immediately. It can be saved and savored, enjoyed in the future. I think it's also useful for them to see that despite the fact that I've reached FI, I continue to work. The infamous Internet Retirement Police want everyone to believe it's WRONG to work in retirement, but that's bullshit. Kate (Cashville Skyline): My net worth is certainly above average for my age (32), but I don't personally consider it a high number. I think it's helpful for other people to see the realities of the choices I've made -- quitting my job three years ago and choosing self-employment after a layoff last summer. I'm still working on my liquid emergency fund and always looking for ways to earn and save more! Ryan (Quietly Crushing It): It depends. I think readers may get 'sticker shock' when they see such a high net worth. I imagine readers focus too much on the specific number and compare it to their own net worth. It isn't encouraging for people to see someone much younger than them who has had financial success. And no matter who you are, there is always going to be someone who has done it better. I'm not perfect either, I've made some bad financial decisions over the years and more recently took a 20K/year pay cut and left a job one month before a 5-figure bonus. As many others have written, money is just a tool and when you have enough, the exact dollar amount becomes less relevant.
Instead of coming up with excuses, the reaction of a reader should be thinking about what steps they can put into place to get on the path to financial independence. It's much easier for people to make excuses instead of making changes in their own life.
The other piece I think that's beneficial is digging into how people invest and digging into how they've structured their portfolio. For instance, a real estate investor may have 1-100 properties. They may have chosen to pay them off, or pay some of them off or maximize their leverage and seeing how that affects their portfolio is pretty interesting. Alexander (Cash Flow Diaries): When I started sharing my net worth publicly, it was not just out of the blue that I decided to do this. I stumbled upon another blogger who was actively providing net worth updates and sharing info about all this assets and how he was growing his own net worth. At the time, I was shocked to have discovered this and from that second, I was hooked! I wanted so badly to be able to do what he was doing with his net worth. I wanted to watch it grow and show others that any Joe Blow is capable of becoming a financial success if you are motivated enough. With that being said, I know for a fact that sharing the big number helps others because it helped me personally.
Mr. Tako: Oh, absolutely (not that I think my number is all that big). A lot of people really wonder what it takes to have that FI life and be free of a job. They want to know the fine details of making it work. It's not about showing off, it's about being open and honest. The more detail we can share about how it's done, the more everyone in the FI community benefits. Net worth is just part of that.
The amount of email and really detailed questions I get from the community has proved this point to me dozens of times over. People want to know the tiniest details -- what's in my portfolio, what yields I achieve to earn my dividend income, who is my ISP, and even where I shop for groceries. I'm going to do my best to give it to them.
Mrs. PoP (Planting Our Pennies): We hear pretty regularly from readers that even if their situation is different from ours, they still are able to draw motivation and affirmation from our sharing with them every month. Seeing in real time that the journey to financial independence is boring sometimes for the PoPs is a nice sanity check for someone else in the thick of it. Because no matter how you slice it, getting to financial independence takes time. Even for someone with a 75% savings rate, according to MMM's table, there's still a seven-year path to financial independence. While short for a career, seven years is still a long freaking time when you're slogging through it working your tush off and it's nice to feel like you've got some company along the way.
Justin (Root of Good): I'm open with my net worth simply because I don't think it's something that we should be ashamed of sharing in the context of discussing financial independence. It also demonstrates to others what it takes to FIRE and how even though our net worth goes up and down, we're still able to enjoy our lives in early retirement without worrying about finances. I know I've helped a lot of people realize that they DON'T need several million dollars to be able to retire early, which means they can retire several years earlier than they thought!
Money is Only Money
At the beginning of the post, I asked this:
Is the guy driving the fancy car wealthy?
I was asking the wrong question. I should have asked this:
Is the guy driving the fancy car happy?
Stuff isn't a recipe for happiness. Now I'll ask you a question:
What does money mean to you?
It's not easy to answer this. Our society worships money and the wealthy. Look no further than the mainstream media to see what I'm talking about:
- If you're over 40, you probably remember a TV show called Lifestyles of the Rich and Famous.
- Younger readers, how about MTV's Cribs?
- How often have you seen this in a magazine or on a financial website:
The 100 Richest People in the World! Meet America's newest Billionaires Under 30!
We are a obsessed with money. And I get it; money is important. You can't have financial independence if you don't have the dollars. But what does financial independence mean? Think about that one too. Financial independence should be about living a life free from money worries. Money is not the end goal, but a tool to achieve a better life. Think of it as buying time instead of stuff. Let's take money off its pedestal and see it for what is really is: just a facilitator. If we all did this, perhaps more of us would be more open about our finances and we'd all be a lot better off. Now time to get back to my net worth stalking... ****** Author bio: Mr. 1500 writes about financial independence, early retirement and dinosaurs over at 1500Days.com. When not in front of a computer, find him with his family in the mountains of Colorado.