The Difference Between Income and Net Worth

by | Apr 11, 2022

This month, we’re deep-diving into financial literacy, and for good reason. So many of us were never taught the basics.  The great news is that we can change that (at any age). Learning about the nuts and bolts of personal finance is worth the effort. With knowledge comes confidence and ease; you’ll move better, work smarter, and feel like you’re adulting like a pro. One of the biggest questions I get asked regularly is the difference between income and net worth. Some terms are a little confusing – they absolutely were for me when I began my journey in finance. If you’ve ever wondered what the difference between your income and net worth is, keep reading. 

Income and Net Worth

Your income only tells part of the story

Money that you get from sources like your job and side hustles or projects (hey, entrepreneurs!) fills up your bucket as income every month. This number matters because the amount of money you bring in every year is a big factor in how financially stable you might feel. However, the income “number” is just one piece of the puzzle. Having a ton of dollars in the bank does not necessarily equate to wealth—and sometimes, a lower-income number can generate greater net worth when smart money strategies are put into place. 

Your Net Worth is the value of everything you own minus everything you owe. Your Net Worth is the factor that tells the whole story of your financial world. This data point represents the sum total of your financial value, including income and investments, debt, mortgages, and other valuable stuff that you call yours. This might include assets like cars, jewelry, real estate, collectibles, etc.  

Building wealth for a better financial future 

Raising your net worth is all about strategically growing your money with savvy money moves. Yes, your income every month matters. AND, it’s not the whole picture when it comes to looking at your finances. Seeing the whole picture will allow you to make savvier money moves, like investing in ways that add value to your net worth (like 401K, stocks, real estate, high-yield accounts). You don’t have to be rich to make strategic money moves and watch your net worth grow. 

Net Worth Myths Busted 

Making a lot of money doesn’t guarantee a high net worth. In fact, 18% of people making over $100,000 annually live paycheck to paycheck in a recent survey of 8,000 American employees. Expenses and debt are the biggest threats to our net worth. And Americans are diving deeper into debt than ever before. The average American household owed $155,622 in debt in 2021, and inflation is making the problem even worse in 2022.  

Another important myth around net worth to break down is the idea that you have to make a lot to be worth a lot. It is absolutely possible to have the net worth of a millionaire and never make over $100,000 annually. In fact, One study found that, “Around 33% of millionaires never earned more than $100,000 as a household in a single working year.” You’d be surprised to discover how easy it is to improve your net worth over time through nothing more than making smart money moves.

Looking beyond your income for a better financial future 

Knowledge is power. Gaining key financial literacy skills can help you gain control over your money, and you’ll be so much savvier when it comes to dealing with your finances. Cultivating more wealth and raising your net worth starts with education. And the best part? You don’t have to do it alone, I am here for you!  And so is my amazing community – if you want a great group for support, join mine. If you are looking for help getting your $hit together or learning how to build a solid foundation so that you can invest your money going forward, sign up for my next GIT Elevated Money Course today. 

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