Wealth vs. Income – What’s your financial net worth?
“Wealth is not the same as income. If you make a good income each year and spend it all, you are not getting wealthier. You are just living high! Wealth is what you accumulate, not what you spend.” Thomas J. Stanley & William D. Danko
Many people with average to high incomes have relatively low net worth. The financial challenges facing most people are not dependent upon the amount they earn but on how they manage what they earn.
So how is your net worth doing? Here is a simple formula to get a “pulse” on your net worth:
ASSETS (cash, 401K, bank accounts, real estate, jewelry, autos, etc.)
Minus
LIABILITIES (mortgage, home equity loan, car loan, credit card debt, student loan, medical bills, etc.)
Equals your NET WORTH
Once you get a good grip on your net worth you’ll realize what you should do in order to keep elevating your assets to your liabilities ratio.
Consider creating a budget, if you don’t have one. If you do have a budget, is there anything you can adjust to accelerate your debt pay off? Use the debt snowball strategy (once you pay off one debt, roll that payment amount unto your next debt) in order to eliminate your liabilities as fast as possible.
Today's tip brought to you by Mvelopes and Money4Life Coaching.