Illustration for article titled Why Net Worth Matters More Than Income

Most people interested in personal finance have a goal to build wealth so they can have options, whether it's traveling, switching careers, or simply retirement. In making that happen, it's important to focus on income—earning more. But Financial Samurai makes a solid argument about why net worth might deserve more of your focus.


He writes:

It's all fine and dandy to have a $20,000 a month income. But if they've got no assets to speak of, there's a high chance that not only will their income go away one day, they'll end up back to square one because people have a tendency to spend everything they earn. Growing your net worth requires a higher level of financial acumen than growing your income.


Basically, it's great to have a six-figure job, but not focusing on net worth could destin you to work at that job forever. Here are a few of the reasons why Financial Samurai says net worth trumps income:

  • You're taxed on income, not net worth: The IRS is interested in how much you make, not how much you have.
  • A different wealth mindset: While income focuses on your being a "worker bee," net worth focuses on your own investments.
  • A higher level of security: You feel more secure about your financial situation.

Of course, this isn't to say that income isn't important. It is, and, in fact, net worth and high income usually go hand in hand. His point is simply that it makes more sense to focus on how much you have than how much you make. And this focus can be helpful when planning for financial goals.

Check out the full article for more detail.

Focus On Building Net Worth Even More Than Growing Income | Financial Samurai

Photo by 401(K) 2012.



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