Income vs net worth: What’s the difference?


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Put simply, income is the amount you earn whereas net worth is the total value of your assets minus any debt. When it comes to measuring your financial health, income isn’t the metric that matters. Sure, you want to know whether your income will help you reach your goals, but looking at your net worth is a better measure of your overall wealth.


That being said, it’s important to understand how both play into your finances, so let’s take a look at net worth vs income and how they factor into your financial health.


Related: Using collateral on a personal loan

Income vs Net Worth: A Measurement of Wealth

Both income and net worth can help measure the chances of someone creating wealth. However, the difference is that income is the primary way someone generates wealth, whereas net worth measures your level of wealth. To put it another way, income is how you make money, but it doesn’t necessarily lead to creating wealth.


Instead, looking at your net worth allows you to see the value of all your assets and liabilities at a specific point in time. It gives you a sense of your financial health in terms of whether you own more assets — such as your home, investments and cash — than liabilities (any money you owe, like debts). Your net worth also allows you to see how much of your wealth is held in assets or cash, as well as offer a reference point to help you measure your progress toward your financial goals.

Is Net Worth More Important Than Income?

While income is a key aspect of your finances, net worth typically is more important. That’s because even if you have a large income, it doesn’t guarantee that you’ll generate more wealth than someone else who may have a slightly lower one. Sure, having a larger income can help you build wealth faster, but it’s all in how you handle your finances, such as the amount of money you save.


Let’s say your friend makes $100,000 per year but has a lot of debt, leading their net worth to be $15,000. On the other hand, you make $70,000 but have invested over 10 years, to the point where your net worth is $100,000. You have more wealth, and therefore are more likely to be financially stable than your friend.


Another instance where income doesn’t correlate with wealth is when someone is older and getting ready to retire. Their income may be lower because they’re working part-time, but their wealth could be in the millions because they’ve worked for many years.


All this to say, income is important but only as important as how you use it to reach your financial goals.

How to Calculate Income

Calculating your income doesn’t simply mean looking at the number on your paycheck. You’ll also want to factor in other sources of income, such as any government benefits, commissions, tips and dividends. Don’t forget to include irregular or occasional income sources, like cash gifts, inheritances and even tax refunds.


Make sure that when you add these up, it’s your net income and not gross income, as that will give you a more accurate picture of what you’re bringing in. Gross income is pre-tax money and before deductions are taken out. Net income, on the other hand, is income that has taxes and deductions taken out.

Example of Calculating Income

Let’s say you have a day job that offers bonuses and commissions. You also invest in securities that provide dividends.

Here’s how you would calculate your income:

  • Annual net salary: $64,350
  • Annual commissions: $3,500
  • Annual bonus: $2,000
  • Annual dividends: $3,234
  • TOTAL INCOME: $73,084

You can then use this total to calculate monthly and weekly income — in this case, it’s $6,090.33 per month and $1,405.46 per week.

How to Calculate Net Worth

Calculating your net worth involves creating a net worth statement so you can see a snapshot of your assets and liabilities. Start by looking at your assets and determining the total amount of all accounts under this category. Assets are items that have some sort of monetary value. These include:

  • Checking accounts
  • Savings Accounts
  • Your home
  • Real estate
  • Retirement fund
  • Personal property (such as your vehicle)
  • Pension equity
  • Securities (like stocks and bonds)
  • Life insurance policy
  • Profit-sharing equity

Once you’ve calculated all of your assets, you’ll need to calculate the total amount of your liabilities. Liabilities are any debts or financial obligations you have, including:

  • Mortgage
  • Credit card balance
  • Personal loans
  • Auto loans
  • Student loans
  • Unpaid medical and dental bills
  • Home equity loans
  • Money you owe to family and friends
  • Unpaid taxes

After totaling up your assets and liabilities, subtract the former from the latter. This number will be your net worth. If your liabilities are greater than your assets, you’ll have a negative net worth. The more assets you have than liabilities, the higher your net worth will be.

Example of Calculating Net Worth

As an example, let’s say that Barbara decided to calculate her net worth. First, she’d list out her assets and liabilities:


  • Checking accounts: $600
  • Savings Accounts: $10,000
  • Home: $365,000
  • 401(k) balance $24,399
  • Vehicle (current value): $32,590
  • Brokerage account: $12,000
  • TOTAL: $444,589


  • Mortgage: $200,000
  • Car loan: $29,251
  • Credit card: $4,126
  • Student loans: $36,700
  • Personal loans: $13,857
  • Unpaid medical bill: $300
  • TOTAL: $284,234

Once she’d written that all out, she would be able to calculate her net worth using the following formula:

  • Total assets – Total liabilities = Net worth
  • $444,589 – $284,234 = $160,355

So, Barbara has a positive net worth of $160,355.

Ways to Improve Your Net Worth

Ideally, you’ll have a positive net worth and will keep growing over time. Here are several ways to improve your net worth.

1. Keep Track of Your Assets and Debt

Tracking your assets and debt will give you an accurate picture of where you stand. That way, you’ll be able to see your progress and what you need to improve or keep doing to grow your net worth. For instance, if you notice that your debt keeps growing, you can use this information to help you figure out why and take steps to rectify the situation.

2. Pay Off Debt

The fewer liabilities you have, the more your net worth will grow. To improve your net worth, you can focus on making sure you’re making on-time payments and avoid taking out new loans if possible. If your budget allows, consider making extra payments toward loans to pay off your debt faster. Some loans, like mortgages, may have prepayment penalties, so check with your lender before sending that extra check.

3. Increase Your Income

Getting a higher salary will help you build wealth by paying off debt or putting money toward investment accounts. Ideally, you want to increase your income and pay off your debts as soon as you can. To increase income, you can consider negotiating for more in your current job, looking for a new one or starting a side hustle to help you make more.

4. Invest

Sticking your cash in a savings or checking account can only get you so far. To accelerate your wealth-building journey, you’ll need to invest some of your money. Start investing by contributing to your employer-sponsored account (bonus if they offer a match), and then branch out to other products as you see fit.

The Takeaway

Your net worth is a snapshot of your finances at a specific point in time and will fluctuate. It’s a good measure to see whether you’re on track with your financial goals. The more you track your assets and liabilities, increase your income and decrease your debt, the more your net worth will grow.


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How to budget for a new dog


Adopting a new dog can be one of life’s more memorable days. Whether the pup is a big fluff ball or tiny tail wagger, a dog owner’s life is sure to change once their new best friend comes home.


Amidst the early excitement and all those puppy kisses, many first-time pooch parents aren’t fully prepared for the cost of owning a pet. New owners could be left wondering: “How much should I budget for a dog?”


Budgeting for a dog can be an important step in the pet adoption process. Coming up with a dog budget might even help a new owner prepare mentally and financially for caring for a pet in real life.


Related: How much is pet insurance?




The first year of dog ownership could cost between $1,600 – $2,000. That amount, it’s worth recalling, doesn’t even include the initial adoption fee (which can run upwards of hundreds of dollars at many shelters or rescues).


Ready for a new four-legged pal? Here’s an overview of things owners may want to pet budget for.




The initial cost of adopting a dog can vary greatly depending on if the dog comes from a shelter or purchased from a breeder. To name one example, Animal Humane Society sets its standard dog and puppy adoption fees between $118 to $667.


The fee cost varies, as some dogs (such as purebreds) are in higher demand and the organization needs to cover the the cost of caring for animals who may take longer to adopt out (such as older dogs).


BartekSzewczyk / istockphoto


At many pet rescues, adoption fees also cover the cost of extra services, like a pet physical exam, deworming, spaying or neutering, or common vaccinations. Meanwhile, buying a Goldendoodle from a breeder costs an average of $2,100.


Purchasing a pet from private breeders, often, does not come with the extra services that some non-profit rescues cover. So, if an owner is considering the breeder route, the out-of-pocket cost of future medical visits, may be one more dollar sign to add to the eventual pet budget.




Some the tiniest puppies can morph, in just a few months or years, into heftier eating machines. Young puppies can grow quickly. And, all that fast growth can mean they’ll eat. … A lot.


So, food and treats can also play a significant role in a new dog budget. Individual dog budgets can vary based on the size of the pooch and type of food each owner opts to feed their pet. Food choices might include dry kibble, wet food, a raw food diet, or some mix of each.


What to feed a dog is all a personal choice between the owner and their veterinarian. However, if someone is looking to estimate the potential cost of feeding a new dog, the American Kennel Club estimates that pet parents can expect to spend between $100 to $500 a year on dog food.


Toys may seem like a silly little add-on, but they can play an important role in puppy development and adult dogs’ mental stimulation.


Toys can help dogs fight boredom when they are left at home alone and comfort them if they’re agitated. (With toys to gnaw on, dogs may be less likely to turn to shoes for a midday distraction.) Absent pricey dog brands, a simple tennis ball will satisfy many dogs.


And, a dog owner can grab a can of three tennis balls on Amazon for about $6. However, the cost here can also depend on just how quickly an individual dog chews through the balls. So, a pet owner may want to budget in a small amount, say $50 a year or so, to buy their pooch some toys.


Iuliia Zavalishina / istockphoto


Traveling with a pet? It may be a good idea to consider a dog walker or pet sitter. This person can be a trusted friend or family member, a neighbor, a kid down the street, or a professional hired services.


Even if it’s a friend, a new pet owner may want to budget in a few dollars to pay this person. Doggie daycare can run $20 or more per day, so it can be helpful for owners to know how many days each month they might need a dog sitter.


A lot of smaller expenses can come with owning a dog. Incidentals to budget for include things like, collars, leashes, dog beds, cleaning supplies, crates, pet bath products, and the all-important groomer.


Some may want to build in another cushion in a pet budget to cover the above-mentioned items, too. Pet I.D. tags and registering a pet with the city are extra costs to bear in mind. (For reference, it can cost between $8.50 and $34 a year to obtain a dog license in New York City.)




Dogs, like humans, need regular medical check-ups. Just like a human exam, dogs need blood drawn to check for diseases, routine vaccinations to prevent disease, and a general physical exam once a year to make sure their health is in working order.


Some pet organizations estimate this visit can run a pet owner between $100 to $300, but it can vary greatly depending on where the person and the pup live (and the age or breed of the dog). Given that variation, it can be helpful to budget at the higher end of that range (just in case).


gpointstudio / istockphoto


Beyond the vet visit, pet parents may also want to add in a budget for preventative medicine. Depending on where an owner lives, a veterinarian could recommend a monthly flea and tick medication, along with regular heartworm medication, to prevent the dog from becoming afflicted.


Flea and tick meds can range from $100 to $200 a year while heartworm medication averages $180 a year.


While pet insurance won’t cover routine veterinary visits, it could come in handy if an emergency occurs with the pup.


For example, a new dog could eat something that causes it to get sick—like, ingesting pieces of a chew-toy or snatching food with bones in it off an owner’s plate (or street).


Many pet insurance plans will cover a portion of medicines, treatments (including surgeries), and medical interventions that aren’t tied to a pre-existing condition.


Paying monthly for pet insurance, while the dog is young, could save an owner hundreds or thousands of dollars as a dog continues to age as well. (Generally, pet insurance costs less when a dog is younger).


Pet insurance may cover things like ingesting harmful items or food, accidents, urgent care, and—in some cases—preventative medicine. The cost of pet insurance can vary by breed, age, and any other health history.




Things just tend to happen with dogs around. They can accidentally knock things over with their tales, swallow objects. and need an emergency vet visit. Dogs can do a lot of damage in a short amount of time (ahem, chewed up leather shoes, ahem).


But, guess what? All that trouble can be worth it for a lick on the face, a little playtime, and coming home to a happy dog. Planning ahead for a pet budget can help new owners focus on those tail-wagging moments with Fido instead of stressing over canine costs.


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