![]() ![]() Think of it this way: Your income is how you make money, but your net worth measures your actual level of wealth, providing a much more accurate picture of your overall financial health. If you invest 15% of that income for 30 years at an 11% annual return, you could have almost $2.5 million in your nest egg by the time you retire!Įven though it’s your biggest wealth-building tool, income is only part of your financial picture. Here’s the bottom line: Your income is your biggest wealth-building tool-so use your paycheck and other forms of income to your advantage.įun fact: The median household income in America is about $70,784. Your monthly net income could look something like this: $4,167 (gross) - $1,200 (taxes and deductions) = $2,967 (net). Net income, on the other hand, is what you actually bring home after taxes and payroll deductions like Social Security and 401(k) contributions.For example, if you earn $50,000 a year and get paid monthly, your gross pay is $4,167. Gross income is the amount of money you make before taxes and other deductions are taken out of your paycheck.All of that counts as income!Īnd since we’re on the topic of income, let’s explore the difference between gross income and net income: The cash you made last weekend selling old records or baseball cards at a garage sale. The dividends or compound growth you earn from the mutual funds you invested in. There are a lot of ways you can earn income: The paycheck you get every two weeks from your job or the profits from the business you own and operate. In a nutshell, income is money you receive on a regular basis, usually through work or investments.įind out your net worth with this free calculator! And what’s the best tool for building wealth and improving your net worth? Let’s find out. So let this number serve as motivation, not shame, to clean up your mess or continue building wealth. And yes, it’s possible to have a negative net worth.īut remember, there’s always time to improve your finances and grow your wealth right where you are. Once you calculate your net worth, you might be surprised to find out how much you have-or don’t have. Or you could save some time by using our nifty Net Worth Calculator for an easy peasy way to figure out your net worth. ![]() Here’s what a list of all your assets and liabilities might look like: All you have to do is add up all your liabilities and subtract it from the value of your assets (the current value of property you own plus money in your financial accounts-think emergency fund, retirement savings, checking account, etc.). How do you figure out where your current net worth stacks up? Let’s find out.įiguring out your net worth is actually pretty simple. 2 Here’s a breakdown of median net worth by age: 1 A lot of that wealth comes from retirement accounts (like a 401(k) and IRA) and home equity (or how much of your home you actually own). Census Bureau, the median net worth of American households is $166,900. What is the average net worth in America?Īccording to the U.S. So to calculate your total net worth, add up the value of all the things you own and subtract how much you owe (if anything) on those things. In other words, the total value of your assets minus your liabilities-aka debt-equals your net worth.įor example, if you own a home worth $300,000 and you owe $100,000 on it, you have $200,000 in equity toward your net worth. Net worth is simply what you own (assets) minus what you owe (liabilities). Let’s dive into the differences between income and net worth and find out how those differences might affect your retirement future. While your income tells you how much money you bring in every year, your net worth gives you a true picture of where you stand financially. But is it really the best indicator of wealth? What about your net worth? And what’s the difference between the two, anyway? ![]() (Thank goodness!)Ī lot of people use income as the primary measuring stick for financial success. (Disappointing, we know.)īut after a couple of promotions, you’re now making a lot more money than you used to. And that big salary was likely missing a zero or two. Do you remember dreaming of a big salary and a corner office as a college kid because you thought a good income would make you rich? But once you hit the “real world,” that corner office probably looked more like a middle-row cubicle.
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