Q: My salary should be more than enough for my needs but I don’t feel like I’m getting ahead. What does it mean to be wealthy?
A: Excellent question. Another way to put this is: “Does my salary define my wealth?”
There are lots of ways to define wealth, but financial wealth equates to your net worth. Your net worth is an easy calculation: add up everything you own (like accounts, property, cars), subtract everything you owe (any debt or loans). The result is your net worth. It can be positive, which means you have some wealth. Or it can be negative, which means your liabilities outweigh your assets.
So how does your salary factor in? There are several ways to increase your wealth: (1) your assets, like an investment account, naturally appreciate and grow over time; (2) you can reduce your liabilities by paying them down; and/or (3) you can increase your assets by saving more. These last two ways are where your salary comes in. If you are using some of your salary to pay off debts and for saving to retirement and bank accounts, then you are doing what I call CAPTURING your salary. You are building wealth by having these dollars work for you. On the other hand, you are not building wealth by living paycheck-to-paycheck and spending everything that comes in. When you are living in this way, your salary doesn’t have a chance to affect your net worth. And if you are spending your salary AND accruing credit card debt each month, then you are living beyond your means and could be creating a negative net worth situation.
You Need a Budget is great software that helps you gain crystal-clear clarity of where your salary is going – so you can start capturing more of it. YNAB says the median net worth of their users increases $3300 in 9 months! They offer a 34 day free trial, and if you purchase it on my resources page, you can get 10% off. Tracking your spending will change your life, and your net worth!
Thanks for reading/watching and please be in touch if you want help achieving YOUR goals!