Working women focus on high income. Wealthy women focus on high net worth.

The difference between the two can determine if you have enough money on hand to live your dreams, start a business, retire early, and transfer assets to the next generation.

The Difference Is Costly

When you’re in a high income tax bracket, you are making a lot of money from your trade, skill, service, or product. The more you make, the more money you pay in taxes. Many people in high income tax brackets spend more money to keep up with the status associated with their high income tax bracket. This habit impacts net worth.

Net worth doesn’t focus on what you make but on what you keep. When you calculate net worth, you have to tally up the assets a person has accumulated. Assets include cash on hand, savings, stocks, bonds, property, precious metals, and anything you own that has value to others in the market. The cash that you have on hand or invested in the stock market is not taxed (until you spend it). High net worth individuals avoid high tax bills that are given to high income individuals so they have a chance to keep more of their money.

The Dilemma is Growing

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There is a generational epidemic called diversification deficit or lack of wealth. So many people are going to school to get better jobs but are graduating with mounds of student loan debt. Education is a great thing if you know how to make it work for you. Education should raise your net worth and not diminish it. It should position you to create more assets for yourself and your family.

Fancy degrees and accomplishments have caused many to graduate to a more expensive lifestyle. You may live in a better home but your home is not an asset if your mortgage payments are keeping you under water. Are you a high income individual who can’t keep her eyes off the fabulous deals that come with credit card usage? Be careful. One late credit card payment can raise your interest rates. And only paying the minimum balance will leave you with a bill that never seems to go away.

The Problem with A Single Source of Income

Often we are under the illusion that if our salary is substantial, we think we will have enough funds on hand to do as we please. You often believe that if you can afford it, you should buy it. With high income, you have no real safety net besides a retirement fund (pension, 401k, etc.) This is only accessible before retirement age if you agree to take a penalty.  Only having one asset such as W2 income at your disposal delays your wealth. Why? Because If that one asset fails, you are stuck.

Help Your Kids Become Financially Independent

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We all want our children to be healthy, happy and prosperous. We set up college funds with dreams of our children one-day becoming high “income” earners. In our school system, we are not taught about what builds worth. Assets build worth. Income is only one piece of your wealth portfolio.

Typically our children grow up financially ill-prepared and in a worse situation than us. Do you know why? Because we didn’t equip them for economic distress.

Start creating portfolios now so that your children can have a net worth that exceeds their income.

The Answer is Wealth

Wealth has nothing to do with high income. Many people are striving for high income and are neglecting their net worth.

Wealth is made up of a diverse list of assets which work together to provide us with options and resources to live a better life. Learning to accumulate different assets is key to building wealth.

Wealth can only happen through diversification. Anyone can get rich but you can only accumulate wealth through diversification.

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Disclaimer: Wealthy Women Daily is solely educational and informational, and is not intended to give investment or trading advice of any kind. Not all asset classes are suitable for all investors. Wealthy Women Daily is a research academy that provides you with the data and analysis you need to make an informed investment decision. It is your responsibility to talk to an expert to understand how specific investments will impact you during tax time. 

Well, if you want to become wealthy, you need to understand what your net worth is now and how to increase it later.

Most people are so concerned about their tax bracket that they fail to realize they may be making six figures but have a net worth of $0.

How is that possible?

This happens when you spend more than you make. When your liabilities (debts) exceed your assets, you are stuck with a negative net worth. And a negative net worth leaves you with nothing to pass down to your bloodline. It forces you to delay retirement and work pay check to pay check just to make ends meet.

You don’t have to live that way. 

The first step you can take to create a strategic financial solution for yourself is to calculate your net worth. This may be one of the best things you document on your wealth-building journey.

Ready to get started? Here’s a simple way to calculate net worth.

Your Tax Forms Are Not A Cheat Sheet

You won’t find your net worth listed on your W2 (year-end earnings statement from your employer). What you’ll find on your W2 is a list of all the money you earned for the year minus any taxes. Taxes are one of the greatest expenses that impact your net worth. If you can lower your tax bill, you can increase your net worth.

Write Down Your Assets

What are assets? Assets are everything you own.

Assets include checking accounts, savings accounts, money market accounts, certificate of deposits, stocks, bonds, real estate, business interests, and other assets that provide you with value in the marketplace.

The value of your net worth depends on how much money you allocate to each of the different assets. A car and home are only a small percentage of a wealthy person’s net worth.

Confront Your Liabilities

What are liabilities? Liabilities are everything you owe.

This may be a painful exercise to confront everything you owe if you are in debt but you have to be honest with yourself in order to make changes. Be real. In order to get to where you want to go, you have to know where you are. You can always go up in life if you know what it takes to get up.

A Simple Calculation

You don’t need to know calculus, trigonometry, or geometry to know your net worth. If you know how to add and subtract, you are on the right track.

Take the sum of all of your assets. Now add all of your liabilities. Subtract your total liabilities from your total assets. What did you get?

If you want to increase your net worth, you have to accumulate assets and reduce luxury liabilities. 

Here’s an example to get you started:

Do you need help calculating your net worth? Contact us to get started. We will make the process simple and easy so you can start making progress today.