The Financial Benefits of Being Social
What does it take to be successful? How can someone who wasn’t born with a silver spoon climb the financial ladder? There was a time when we were told that all we had to do was earn a college degree in order to secure our financial futures. Later, we were told that we needed to skip college and start our own tech firm in order to rake in the dough.
What no one ever explained to us was the value of social capital, the skills that help us function within a social group, whether it’s our neighborhood or place of employment. Studies have shown that social capital is key to achieving financial success.
While it’s true that utter jerks with zero social capital do become financially successful, strong social skills (and ties) can propel us to success.
What being social means
Being social is not the same thing as smiling at everyone you meet or being outgoing enough to carry on a conversation with a total stranger. After all, even a sociopath can appear friendly.
Being social means being part of authentic interpersonal relationships, sharing a sense of identity, values, and norms. You trust the people in your circle(s), and they know they can trust you. You are invested in their achievements and are happy to help them meet their goals. In return, they want the best for you.
It’s being part of true give-and-take relationships that gives you social capital.
How it works
In order to understand why authentic relationships matter and how they can impact financial success, let’s take the example of starting your own small business.
When starting any business, you need three different types of capital:
- Financial capital is the money you need to open your business.
- Human capital refers to the people you hire to help you get the business up and running.
- Finally, social capital describes the connections you make with people, a shared cooperation that causes people to trust you and you to trust them.
As you open your doors for the first time, you are aware that 20% of small businesses fail within their first year. By the five-year mark, 50% have closed. You have sunk nearly everything you own into this enterprise and are concerned about what might happen.
This is where having social capital pays off. It doesn’t take long to notice who your customers are. There’s the owner of the coffee shop you frequent, the elderly next-door neighbor whose driveway you shovel, and friends from the job you just left. Your interactions with them have given you social capital. Just as you are interested in their success, they are concerned with yours. They recommend your shop to friends and family, which brings in more customers. Soon, you’re confident that your business will turn a profit.
Would it be possible to succeed without social capital? Yes, but the fact that you do enjoy social capital has made your success more likely.
Because the river flows in both directions, you still care about your next-door neighbor and continue to shovel his drive on snowy mornings, still support the local coffee shop, and still check in with old friends from work.
Health benefits
A study from the National Institute of Health (NIH) found a significant association between social capital and health. One report NIH mentioned came from Northern Sweden and showed that those with a strong social network self-rate their health as better than those without.
The healthier you are, the less you will spend on medical costs and the more money you will have to save for the future. In addition, let’s say you started your own business in your 40s and can’t imagine being happy as a retired person. Being healthy means being able to work as many years as you would like, building the business your friends helped you get off the ground. Working longer also means having the potential to earn more money, another benefit if you ever do decide it’s time to retire.
Never too late
Some of us find it easy to become part of a group, while others are so reserved that the idea of putting themselves out there is unsettling. However, you’re never too young or too old to build social capital. It begins by taking a genuine interest in other people and doing what you can to support them. If you have the opportunity to become part of a community effort, take advantage of it. The next time someone asks for volunteers to plan an activity at work, raise your hand. Don’t just walk your dog in the morning; form a walking group with your neighbors. Join a bowling league or book club. Think about what interests you and look for other people with the same interests.
Wallis Simpson is famous for saying, “You can never be too rich or too thin.” We say, you can never be too socially connected or too happy.
This content was produced by The Ascent, a personal finance brand by The Motley Fool.
