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Net Worth and Wealth Are Different: Does It Matter? (Yes!)

Net worth and wealth are commonly thrown around as synonyms. And in broad strokes, yes they are similar. But they are not the same! They are different. And that difference is really important to understand!

Two serendipitous events led to me investigating and understanding this difference a lot better.

First, a reader emailed me frustrated that while their net worth was growing on paper, they did not feel any closer to financial freedom.

And second, I re-read Rich Dad, Poor Dad by Robert Kiyosaki. This book implicitly discusses this exact topic and the difference been net worth and wealth quite a bit.

net worth wealth

So let’s do a deep dive…

What is net worth?

I’ve talked about this a bunch and stand by my definition as net worth as the score card of wealth.

Keeping things simple, that’s really what net worth is. It helps you gauge your wealth. It’s a measurement tool. Too many physicians and people in general still equate income with wealth. And that causes a huge amount of problems as we know. So, the correct measurement tool for wealth is net worth.

But still, net worth is not wealth. It just measures it. Confused yet?

As a former chemistry major (who remembers shockingly little about chemistry for the recently refinanced $200,000 I paid in loans for that degree), I do recall professors beating into our heads that measurements are estimations. Estimations that are informed, but also inherently flaws. They paint a picture for us regarding the subject that they are measuring. But they themselves are not truth.

And that’s as philosophical as I’m gonna get here. So, moving on…

What is wealth?

To be honest, I am just as guilty as anyone for confusing net worth with wealth. But I did always favor a definition of wealth as financial freedom.

And this is where Rich Dad, Poor Dad comes back into the picture. Robert Kiyosaki, at one point of the book, defines wealth as the number of days you can go without working.

True, that is basically the same as financial freedom. But I feel those words do a particularly good job of describing the concept.

So, do you see the difference between net worth and wealth?

Net worth exists in a cold laboratory in a vacuum. It’s just a number.

Wealth is your net worth put into action in the real world. It’s throwing your net worth into the deep end and seeing if it can swim.

Sometimes, we all can trick ourselves into thinking that our wealth is greater than it is because our measurement tool either isn’t being used right or is inherently flawed. Or both.

Remember, there’s three kinds of lies:

  • Lies
  • Damn lies
  • And statistics

Net worth is a statistic. And it can lie. That’s exactly what the reader was feeling when they emailed me.

Let’s examine via illustration

I always learn the best through stories and examples. That’s probably why I love books like Rich Dad, Poor Dad, The Millionaire Next Door, and The Psychology of Money so much!

The curious case of Dr. Net Worth

Dr. Net Worth is a plastic surgeon (oh no!) living in a moderate cost of living area. He makes $500,000 each year in salary in private practice and has been in practice for 20 years.

This plastic surgeon is financially educated and tracks his net worth. He saves 20-25% of his gross income. This allows him to put aside a good amount of money in retirement accounts like his 401k and a taxable investment account. However, he owns no cash flowing assets like real estate, passive businesses, or dividend paying stocks. He owns his primary residence with a mortgage that, including his initial down payment, is 50% paid off. The property has also appreciated significantly since he bough it 20 years ago.

His net worth is $4 million. But 75% of that net worth is tied up in his:

  • Primary residence
  • Age restricted retirement accounts
  • Taxed stock holdings
  • Things in his garage (like cars, golf clubs, furniture, etc.)

Is Dr. Net Worth wealthy or just have a high net worth?

Well, he definitely has a high net worth. But how wealthy is he?

Let’s see…how many days can he go without working? At this point, only 25% of his net worth is accessible. Sure, he could liquidate retirement accounts early with yearly withdrawals, but that will be limited via penalties and taxes. And yes, he could sell his house, but he still needs a place to live…and he will pay heavy taxes on that appreciation. Plus, all the “stuff” likely isn’t going to sell for as much s it is worth on paper in his net worth calculations…

But what about Dr. Wealth?

Dr. Wealth is also a plastic surgeon (C’mon..I had to!). She lives in a moderate cost of living area as well. She makes $500,000 a year as well but has only been in practice for 3 years.

And of course, she is also financially educated and tracks her net worth, saving 25% of her gross income. Like Dr. Net Worth she maximizes her retirement accounts. But unlike Dr. Net Worth, Dr. Wealth then focuses on buying cash flowing assets, specifically cash-flowing real estate like this and passive (or leveraged) businesses. She also owns her primary residence with a mortgage that is only 10% paid off with modest recent appreciation.

Her net worth is only $1 million. 50% of that is tied up in retirement accounts and her primary residence. But, the remaining 50% is in her investment properties and businesses. Plus, she generates $10,000/month via leveraged income from rent and side business income.

How do we define Dr. Wealth?

Her net worth is nothing to scoff at. But, looking superficially, would you rather have a net worth of $4 million or $1 million?

However, how many days can she go without working? Of course, it depends on expenses. For some, this may cover only 50% of their expenses or less. But for many, this can cover all expenses, which equals financial freedom.

The bottom line is that expenses are 100% under our control. So Dr. Wealth can be as wealthy as she chooses more or less. That is also freeing…

So who is more wealthy…Dr. Net Worth or Dr. Wealth? I think you all know who I would choose…

Taking a step back

This is a contrived example, obviously. In reality, such disparities will rarely be so distinct. But it does illustrate the point very well.

For another comparison, this reader who is a more senior plastic surgeon had a sizable net worth tied in primary residence and retirement accounts. Meanwhile, my net worth is considerably less as broken down here. But my passive income via rent and side businesses currently just about approximates our expenses…

So, does net worth not matter?


That would be the worst message that anyone could take away from this post. I love net worth. It’s important. I recommend calculating it every few months. It helps you learn what you are doing to build wealth and what you are doing to hurt your wealth building.

It’s the best measurement tool or statistic for wealth that we have.

Related Post:
The 7 Step Basic Formula for Wealth as a Physician

But, remember, that’s all it is. And measurement tools and statistics can be mis-used or mis-analyzed leading to faulty conclusions.

There are many roads home…

A physician with a net worth of $5 million that is 100% in retirement and taxable accounts but $0 of “passive income” can retire with yearly withdrawals of $200,000 using the 4% rule.

A physician with a net worth of $2 million with 50% in retirement accounts and passive income of $13,000/month can also retire with a yearly “income” of $200,000.

In my mind and by our definition, both of these physicians are equally wealthy. Despite very different net worths. Again, contrived examples but proving a point.

Usually, net worth and wealth will correlate very closely. But the point here is that the correlation is not 100%!

So, what should we all do?

In the end, we all need to keep both of these definition in mind.

Net worth is a powerful tool and teaching guide for newcomers to financial well-being. And wealth is the goal. (For more on this, check out my free masterclass webinar here!)

I get concerned by physicians who “massage the numbers” to make them seem more favorable while in reality, their asset column is not actually helping them.

So, when we calculate our net worth, we need to be constantly thinking about how this translates to our wealth. A number on paper is just that. Wealth is our net worth in action!

So, how can you increase your net worth and wealth?

What do you think? Are net worth and wealth the same thing? How are they different? Have you noticed a disparity between the two in your life? Let us know in the comments below!

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    Jordan Frey MD, a plastic surgeon in Buffalo, NY, is one of the fastest-growing physician finance bloggers in the world. See how he went from financially clueless to increasing his net worth by $1M in 1 year and how you can do the same! Feel free to send Jordan a message at [email protected].

    3 thoughts on “Net Worth and Wealth Are Different: Does It Matter? (Yes!)”

    1. Dude man this was an awesome post. Yeah dude definitely agree that wealth is not defined by net worth but a measure. So many other things that go into wealth just can’t be measured such as you mentioned above. I think Vicky Robbins book your money or your life it’s so popular because it tries to do what your post is trying to do where you’re trying to get to the definition of what wealth means when it’s tied to your time and energy.

    2. Eh, I would take the $4MM. You didn’t dissect the specifics of the money, but assuming that the majority is in equities in retirement accounts, I would retire (or go part time) and do 72t distributions, splitting that with the $1MM in taxable. He’s been in practice for 20 years, so early 50’s; a perfect time to pull the trigger on 72t for living income. Also, small mortgage balance (relatively) compared to the second exemplar who seems highly leveraged and dealing with running rental properties.


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