Two terms we hear a lot when it comes to our finances are 'income' and 'net worth'. Although they may sound similar, they both play a very important (and different) role in your overall financial wellbeing. Here is a closer look at your income vs. wealth.
WHAT IS INCOME?
Income is all of the taxable wages that you earn from working. This could be from your full-time job, a side hustle, freelancing, etc. Anything that you earn and pay taxes on is counted as part of your income.
WHAT IS NET WORTH?
Your net worth is your total assets, such as bank accounts, minus any liabilities, such as student debt, you owe. If this is a positive number, no matter how small, you are on the right track and should keep working towards lowering your liabilities to help that number grow. If that number is negative, you should look into creating a comprehensive debt elimination plan. If you need help figuring out your net worth, check out our step by step guide by clicking HERE.
WHICH IS MORE IMPORTANT?
While both are extremely important for your overall financial wellbeing, most experts say your net worth is a more accurate representation of financial status. If you’re making a ton of money, but not investing it back into yourself, such as a 401k, real estate, stocks, etc., your net worth and overall value will be affected.