Net Worth, Not Income
Which number tells you how you are actually doing?
The idea
Income is a flow and net worth is what remains after everything owed, and only one of them measures your position.
In the real world
A high earner with large debts can be worth less than a modest earner with none.
Going deeper
Income is a flow and net worth is a position, and only one of them measures where you actually stand. A high earner with large debts can be worth less than a modest earner with none.
What makes the distinction practically useful is that it changes what you track and therefore what you optimise. Income is highly visible and socially salient; net worth requires a deliberate calculation and moves slowly. The gap between the two is exactly where lifestyle creep operates, which is why the number is worth computing occasionally even though nothing forces you to.
Where it stops applying
Net worth ignores earning capacity, which is a real asset and often the largest one early in a career. A high earner with debt genuinely does have more capacity to change position quickly.
Why it matters
It changes what you track, and therefore what you optimise.
Try this today
Add up what you own and subtract what you owe, once.
Test yourself
One person earns £120,000 with £90,000 of debt. Another earns £45,000 with no debt and £40,000 saved. Who is in the stronger position?
Show the answer
The second, on net worth, though the first has more capacity to change that quickly. Income measures the rate money arrives; only assets minus liabilities measures where you stand, and a high flow can coexist with a negative position.
Learn this in the feed Answering from memory, then again days later, is what makes it stick.