As a society, we tend to measure financial success based on spending patterns, but our metrics are faulty. For example, living in one of the best parts of the country, having a decent job, living a live that many people dream of been one of the hundreds of thousands moving up the income-earning scale, able to afford material things that were once out of parent's reach. To a bystander, you have an enviable life and there's an automatic assumption that you are wealthy.
However, building wealth is more about how much you keep.
Broke people and rich people approach the same amount of money differently and here is why; broke people think it is about how much you earn but rich people know it's about how much of your income you are able to keep and convert into assets that can provide you with an income in future.
The fundamental difference is that wealthy people understand the relationship between how we earn and how we spend and how they know where the balance is.
EXERCISING OUR NET WORTH
Our net worth is our assets minus our liabilities and it gives a snapshot of where we stand financially.
- Make a list of everything you own of value.
- Make a list of everything you owe.
- Subtract your total assets from your total liabilities.
- Don't be afraid or ashamed of the number. (calculating your net worth will let you know your starting point)
- The figure is not as important as the trends in net worth. (as long as you make a commitment to keep growing it, you will be fine).
