Okay, so net worth and income. Do you know exactly how much money you have? Now, I’m guessing some of you do and some of you don’t. I can almost assure you though that all of you know how much money you make per year. I can tell you in a second what my net worth is. Not going to do that, but you get what I’m trying to say. In my opinion, the net worth really helps us when it comes down to tracking our expenses and seeing where our income is going each month. It gives us a financial understanding of our current situation.
I know many people who make over $100K a year but have very little net worth. There aren’t putting money into a retirement account, they live in expensive apartments, their car payments are high, and they save very little each month. You see all of us have a cap on how much money we can save each month, depending on what income we have coming in. Now, the person making $60K a year could save as much per month as the person making $100K per year, depending on expenses and what each individual is spending their money on. But, it’s possible. A higher-income doesn’t always equal a higher net worth. What we have control over though is our income. The sky is the limit when it comes to producing more income, and it’s something we can increase.
When we look at the net worth it, simply put, it comes down to liabilities, debts, and assets. Take all your assets and subtract your liabilities and debts from them. Very simple. There are a ton of apps and software out there that are really great for helping you track your net worth. One I’ve used personally is Personal Capital. The software is extremely simple to use and I still use it to this day. I check it bi-weekly to see how my accounts are doing and add any debts or liabilities I may have to keep it up to date as much as possible. This works for me. Everyone has their own way of doing things. I know many people who track their net worth using an Excel spreadsheet. That works too!
Tracking your net worth gives you many positives to look at. You’ll begin to see over time that your net worth is moving in a positive direction (I hope so). You’ll notice your debts shrinking and you own more than you owe. (I hope so).
But, it really just comes down to see where your money is going each month.
A higher-income doesn’t always equal a higher net worth. It all depends on the person and their financial habits. I think a lot of us get hung up on measuring our success with money. I know I was that person one time. If I don’t have this such and such net worth at this age, I failed. If I’m not making this income by this age, I failed. Don’t get me wrong, money is important, and you should definitely get a grasp on it early in life. But, don’t ever tie your personal worth to your net worth and income. Understand it, check it when you want to, but don’t over analyze it. Get better at tracking your expenses to see where the money is flowing.