Income vs Net Worth
Income is what flows in. Net worth is what stays.
The person earning $200,000 and spending $210,000 is getting poorer. The person earning $60,000 and saving $15,000 is building wealth. Their trajectories are the opposite of what their incomes suggest.
What Net Worth Is
Assets minus liabilities equals net worth.
Assets: cash, savings, investments, retirement accounts, real estate equity, business stakes, vehicles at current value.
Liabilities: mortgage balance, car loans, student loans, credit card balances, personal loans.
If assets total $150,000 and liabilities total $80,000, net worth is $70,000.
Why Net Worth Beats Income
Income can stop overnight. A job loss, illness, or company failure ends it suddenly. Net worth represents what you have actually accumulated. It is what you live on if income stops.
How to Grow It
Increase assets: invest consistently, build income-generating assets, grow retirement accounts.
Decrease liabilities: pay down high-interest debt aggressively, avoid new debt for depreciating assets.
Do both simultaneously. The combined effect compounds quickly.
The Habit That Changes Everything
Calculate your net worth every quarter. Write it down. Watch it change.
When you track net worth, every purchase becomes a different question: does this grow my net worth or shrink it?
Most consumer spending shrinks it. Most investments grow it. Keeping score changes behaviour.