You make a lot, but how much do you keep?

It may be great that you earn a six-figure income, but if you live a six-figure lifestyle – the occurrence of one negative financial event can cause a financial downward spiral. Nothing teaches us this lesson more than the previous NBA lockout.

We witnessed firsthand millionaires struggling to make ends meet as they hope to soon get a paycheck. Many of us are saying, if I had that kind of money, I would not be in that situation.  Oh really?

But know, whether big or small if you are living at or above your means, you are no different. Whether you are making $20,000 or $2 million, if you do not adjust your financial habits you may find yourself in the same situation of your favorite NBA players.

Not Poor, Just Broke
I like this saying a lot. When my family members or friends ask me for cash or expect for me to make purchases that are simply beyond my budget, I quickly refer to this phrase. This phrase is powerful, in that, I have already set money aside for my monthly savings, paid all my bills, and met my allocated budgeted amounts for necessary expenses. And more importantly, unless someone really, really….I mean really need funds, you should consider your savings totally off-limits. In the end, it has allowed me to accumulate savings month after month.

Income is Great, But Net Worth is Better
Bragging about how much money you make is great, but bragging about your net worth is even better. What is net worth you ask? Well, it is the amount you are worth after you subtract your debt from your assets. If you have a negative net worth, it means you have more debt than assets, if you have a positive net worth, you have more assets than liabilities.

Before making any financial move, determine whether you are contributing to a positive net worth. Paying off credit cards, purchasing a home, or saving for a rainy day can all increase your net worth.

But keep in mind, there may be some financial events that may not necessarily increase your financial net worth today, but may do so later, such as a student loan.

Keep A Little
More importantly, don’t forget to save, save and save. Whether you make a little or lot, the key is to consistently stash something away. Keep in mind, you never know where this life may take you, saving first before paying anyone else consistently will help you weather adverse financial events that may come your way.

Remember, Your Choice Your Future!

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7 thoughts on “You make a lot, but how much do you keep?

  1. Great advice. I think too often people in our generation and younger are only focused on cash flow–and mostly cash out flow! Net worth is definitely an important aspect that we should be focusing on more in our personal decision-making.

  2. Oh really is right and I know first-hand! Love the “not poor – just broke” saying and another lesson I learned the hard way by helping a family member out. In fact, if anyone needs their electric bill paid, some diapers bought, or help with putting food on the table, I’ll be the first to reach in my pocket. But other than that, my new saying is “I ain’t the one” 🙂

    I agree with your net-worth statement, but income is king! Without it, there is no savings or net worth. You have to build your foundation first meaning – learning the psychology of consumerism, developing critical decision making skills, and then learning the art of frugality.

    Imagine if these ‘ballers’ got their head on straight about finances, made their money, and then took your advice about savings and building their net worth. What an incredible life they would truly lead and what a wonderful future they would be building!

    I’m also in full agreement; if you have your head on straight, no matter how much you make, I believe you could save and build a net worth. Excellent post.

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