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The Necessity for Identity Capital

Choose FI has partnered with CardRatings for our coverage of credit card products. Choose FI and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities. American Express is a ChooseFI advertiser. Disclosures.

No, we aren’t making up cool-sounding theories in our boiler room. Identity Capital is very real.

As we all are aware, life and lifestyles have changed dramatically over the last generation (roughly 20 years). Money still makes the world go’ round, but technology is the fuel. We now have opportunities due to technology that will improve our quality of life (QoL).

Enter Identity Capital is the collection of your experiences, education, goals, and effectively everything that makes you “you” (that doesn’t involve monetary capital).

So why is Identity Capital so important? Well, according to economies of scale, as the technology around us improves productivity and output with delayed diminishing marginal returns – we can build out our talents to complete more complex tasks. Your Identity Capital is at the heart of those explorative and sometimes unconventional approaches to solving problems.

Identity Capital is also imperative to self-esteem and satisfaction with both your professional, personal, and financial lives. You have a set of skills for all three of those factors. Identity Capital customizes those factors to your personality. And your personality drives those factors. It’s a two-way street.

Now that you have a snapshot of what Identity Capital is grab your favorite beverage and put on your Choose FI t-shirt. Don’t have one? Get one here (JOIN US). We’ll go in-depth on why you need Identity Capital. Not only for your own self-improvement but how it will assist you on your path to Financial Independence.

What Is Identity Capital?

Identity Capital is what makes you “you. ” It’s the highly specific skill set that only you have. It’s recognizing that you aren’t simply a sum of your professional and personal parts.

As our parents probably remember, Identity Capital was called “resume builders.” But, frankly, Identity Capital is more than that. They are skills that you’ve acquired through hard work and play.

And the really cool angle of Identity Capital is that you don’t have to pass a test or be pre-qualified to get it. It’s something you possess. It’s important to you. Yes, you’ll use those niche skills either in your personal or professional life – but how you look at your skills and talents separates them from a skill set to capital.

Building Identity Capital

The good news is that it’s not difficult to build Identity Capital; however, it takes time. Here are some helpful ideas to get you started:

  • Stop waiting to pursue what you want – failure only happens when you don’t try
  • Keep a journal or start a blog
  • Spend time with friends and family
  • Remove the toxic relationships from your life
  • Realize your natural talents by challenging yourself to new adventures
  • Learn a new language
  • Take a class in a subject you’ve always wanted to learn
  • Start some DIY projects around the house
  • Pick up a new sport
  • Travel 
boy works on circuit board to build identity capital

Time Cannot Be Bought Nor Renewed 

We all know the old adage of “spend your time or spend your money.”

However, money is a renewable resource; time is not. We all have a limited amount of time on this planet. And although we can do things physically, emotionally, and psychologically to extend that time, it is not guaranteed.

The point: enjoy life. Identity Capital is the realization of both tangible and intangible talents and interests. Leverage it to enjoy the limited availability of life.

Institutional Memory

Institutional Memory is a concept first conceived by psychologists to explain the importance of long-term employees who carry on the methodology, influence, and knowledge of their respective organizations (corporations to group therapy). This is to ensure that “you remember where you came from” and can help expand the knowledge of newcomers (hires) exponentially from those with Institutional Memory.

So, what does this have to do with Identity Capital? As most do, the institutional memory concept bled over to other fields and began to represent people’s personal experiences and skill sets.

Durdana Achakzai, an international MBA student at Harvard Business School (HBS), talks about how she expanded her institutional memory by taking diverse classes, studying with students and professors who challenged her, and the positive experience of gaining those important memories.

Who Should Improve Their Identity Capital?

Everyone should seek to improve their identity capital, but there is a natural progression due to age.


It’s a terrific age to start building your Identity Capital. Volunteer for a service or a cause you believe in. If you applied to college and it’s nearby, ask if you can volunteer in the bookstore. The initiative and your skillset are equally important.

Your teens are also a critical time in your life because it’s usually when you decide whether to attend university or pursue other interests.


The most critical age group. Not only will you develop skills in a classroom, but you’ll also begin your first career during your 20s. Further, your adult tastes will develop, giving you more opportunities to expand your Identity Capital. Do things that will help you succeed, but also those that will make you happy.

Our 20s are not a waste of time but a time for deliberate and attentive discovery. Those who take the time to investigate and also have the courage to commit build stronger identities. If you want to get different results than the rest, you must think and act differently.

Meg Jay, a clinical psychologist who specializes in Identity Capital, had this to say about your 20s and how to approach the job market:

“Many people in their 20s aren’t building up any of them [Identity Capital skills] by sitting around at home or taking dead-end jobs. GPA and college degrees don’t really count, since everyone has them.

Take the job with the most Identity Capital. Where you’ll build the most relationships, learn the most, grow the most. NOT necessarily make the most money”.

Meg Jay “The Defining Decade”

Dr. Jay also has an excellent TED Talk about Identity Capital in your 20s.


As you can see, Identity Capital grows exponentially over time as we age. A decade of Identity Capital can be worth more than all the money you earn in a lifetime. Obviously, this is the case if you want to be happy.

Your 30s are when Identity Capital flourishes and establishes itself. By this stage in life, you’ve already built the foundation and expanded your interests. Further, if you are seeking Financial Independence, you’ve already set your goals and have a solid plan to keep your monetary wealth healthy. Take some chances and expand your horizons.

40s and Beyond

Your 40s are a good time to reap the fruits of your labor. You have your priorities in place and years invested in a field that you probably enjoy (if you have combined your FI and Identity Capital talents).

Keep in mind that you never stop building Identity Capital. So you’ll be doing so far past your 40s. It’s about perspective – your Identity Capital can be a massively positive resource or just a collection of interests and experiences. How you apply it can mean the difference between living a dream life or just having a stale collection of hopes and dreams.

Wealth vs. Identity Capital

OK, so what do we mean by wealth? The typical reply would be “money”.

Let’s look at a simple example: if a person has $1,000 in cash and a house worth $190,000, is their cumulative wealth $1,000? Of course not. Wealth is money and anything else that can be converted into money. In other words, wealth is always expressed in terms of money.

We can assign a monetary value to the intangible (see our cost-benefit analysis article), but this doesn’t apply to Identity Capital.

What’s the importance of Wealth Theory in regards to Identity Capital? Well, would you be happy with your life if you had enough wealth (money) to be comfortable but didn’t have anything else in your life that you truly, personally valued? Is that a life worth living?

Financial Security Vs. Personal Fulfillment 

We all have taken a job we didn’t like. Usually, this is our first job, but it could happen later in life – if you don’t take stock of your financial needs and personal fulfillment.

Not planning at all is planning to fail. Goals are incredibly important. Further, if you are personally unfulfilled at a job – you’ll not only resent having to go to the office every morning, but you’ll be generally miserable.

health and wealth

The Great Resignation

In 2021, a mind-blowing 38 million people quit their jobs. The media has endearingly referred to this as the Great Resignation.

The majority of these now ex-employees cited unfulfilling work terms (such as low pay), but more so because of the conditions. Not being proud of their work, abusive relationships between management and staff, and similar factors played a greater role.

It’s fairly clear that we are becoming more aware of our Identity Capital and putting a higher value on it than we have before. Before, workers would stay because they felt they had no other choice. But there are other choices out there. And 38 million wanted to exercise that choice. Could you count yourself among one of those?

great resignation

Can Be Paradoxical 

It can be difficult to separate your professional life and your personal life. Some people love what they do, but a recent Gallup poll shows that 85% of Americans are dissatisfied with their jobs. Despite the recent job exodus, history has shown that most people stay unhappily employed.

This creates a natural paradox. So many people look at their jobs as a required albatross – hanging around their necks and weighing them down. They don’t want to take a chance by trying a new career or field because that steady paycheck keeps them afloat. Yet, so many yearn for a change. That’s your Identity Capital pushing through to the surface.

Use it before you lose it.

Identity Theory And The Tenets Of FI

Financial Independence is all about balancing our financial needs with our personal desires. The goal isn’t to accumulate as much money as humanly possible, which is the central misnomer of the FI lifestyle. The goal is to achieve happiness by ensuring we have enough money to pursue our hopes and dreams. Knowing what we truly want, having the courage to step out of our comfort zone, and combining all aspects of our lives into a neat, happy package is the very definition of Identity Theory. 

The Bottom Line

The Financial Independence movement is centralized around happiness and making our dreams come true by ensuring we have enough monetary capital to have the freedom to do as we please. Identity Capital is inherently what we seek. It just so happens we can use that fortunate “byproduct” to improve our financial situations. It’s also what feeds our minds, hearts, and souls – it makes us who we are.

Frankly, it’s a match made in heaven.

Choose FI has partnered with CardRatings for our coverage of credit card products. Choose FI and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities. American Express is a ChooseFI advertiser. Disclosures.
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