Net Worth matters. If you have an interest in your own personal finance, it matters. Its simple really – if you build your wealth, you have options. It lets you travel, change careers, or eventually retire. Its the difference between Renting a house and Owning a Home. Most people who worry about these aspects of personal finance worry about income – about how much they earn. You and your wallet are better served if you worry about your Net Worth.
If you worry about income, that’s all fine and good: $2000/wk is a nice thing to have. However, if you don’t worry about assets, you need to know that one day that income will go away: layoffs, downsizing, or plain old retiring. You wont make 2k a week forever. If you don’t think about assets, you’ll end up back where you started; the money will be gone and you’ll have some serious worries on your hands.
People have a bad habit of spending everything they earn.
Growing a little number called your Net Worth can lead to better options that growing your big number: income.
Basically, if you have that great six-figured, but you don’t think about assets, you could end up working those six-figures forever.
Its worth noting here that the IRS isn’t interested on how much you have, rather they watch how much you make; and tax you on it. With income you’ll focus on the work, Net Worth makes you focus on investments.
It’s all about security and financial independence.
Of course, income is a very important facet in this equation:
income and Net Worth go hand in hand.
But as income is spent, on bills, food, fun, rent etc, it won’t come back. If you build your net worth via assets – such as purchasing a house over renting – you’ll have a long-term cushion to park your money and give you options.