Should Millennials Focus on Income or Net Worth? (2024)

Go to any financial website out there, and more often than not, you’ll find articles advising you to focus on your net worth, not your income.

This expert advice stems from the reality that income doesn’t mean wealth. Someone making $500,000 can make the same poor financial choices as someone making $50,000 a year and end up filing for bankruptcy. Because income is no guarantee of wealth, the experts guide you to focus on your net worth instead.

I’d like to argue that the advice to “focus on your net worth” is a blanket statement that may not apply to everyone.

For millennials especially, who are struggling to repay student loans, get their first well-paying job, or even just get their foot in the door of the career of their choice, net worth is the farthest thing from their mind.

Here are just a few reasons why focusing on net worth may not be your best course of action for now.

Are you just starting out?

Focusing on net worth is a sound principle for people who have a steady income that they are able to invest, but if you’re just starting out or still building your career, focusing on income should be your number one priority.

You’ll never be able to increase your net worth if you’re working a low-paying job and you’re living paycheck to paycheck with nothing to spare.

You can’t see returns on your investments if you don’t have the cash to invest in the first place. You can’t buy real estate that will generate passive income unless you have the money for a down payment on the property. You can’t save for retirement if you’re struggling to pay your monthly bills.

Focus on income first

As they say, “What you focus on grows.” Before you make your net worth your number one priority, you need to establish a firm foundation for your finances with a steady and reliable stream of income.

If you’re working a low-paying job, it’s time to ask for a raise or look for a higher-paying job.

If you’re happy with your job, but still need more money, it’s time to look into some side hustles. Start a blog, become a freelance writer, or buy, sell, and flip things on craigslist.

Find a way to monetize the things you’re both good at and enjoy doing. There are some amazing and creative ways to earn some extra income. Check out DC’s new book Hustle Away Debt for more about how side hustles can help you grow your income outside of your 9-5.

Once you establish a firm foundation for your salary or career, you’ll be in a better position to focus on your net worth. As you earn a higher salary, invest the difference in stocks, bonds, and real estate. You’ll be able to increase your net worth exponentially faster if you focus on increasing your income as well as your “disposable or investable income.” Increasing income now will mean laying a more solid financial foundation for future decades.

Fluctuating markets can drive you crazy

The market has historically moved in cycles of boom and then bust. Downturns are always around the corner, whether that corner is months or years away. Don’t ever forget that the market could have yet another downturn or even a recession like we saw in 2008.

By only focusing on net worth and watching the numbers fluctuate from day to day, you’ll drive yourself crazy. If you have the means to invest as a millennial, then absolutely, get started in the stock market or find your first rental property. Just be sure not to focus too much on the daily numbers. Investments are long-term prospects, and there isn’t much you can do to fix your net worth in a day.

Net worth can inflate your perceived wealth

When most of your fortune is tied to bonds, stocks, and real estate, your perceived wealth can be higher than your actual wealth. Seeing those net worth numbers grow can make you overly confident in your wealth.

If you’re keeping track of your net worth, and business is booming, you may be more likely to make less financially sound decisions. It’s important to live a life appropriate to your income. Don’t speculate on your own net worth and lose out in the long run if the market takes a bad turn. You don’t want to be stuck with credit cards debt, car loans, or debt on expensive toys because you thought that you could afford something based on your net worth.

Focus incrementally more on net worth

I believe that if you are just starting out in your career, you’ll be better off in the long run by focusing first on your income. After you have established a solid financial foundation through your income and profits, you’ll be able to focus incrementally more on net worth and have that “millionaire mentality” that net worth aficionados rave about.

Until you reach that point, however, make getting out of debt and increasing your income your number one priority. As you have more income to spare, you’ll be able to focus more on your net worth. Making your income your priority is the first step to becoming financially independent because that income is what will allow you to purchase dividend stocks or passive income properties, therefore increasing your net worth.

So don’t feel bad if you’re more focused on your monthly income and career at this point in your young adult life. It’s normal, and you’re well on your way to being able to make net worth your highest priority.

Check out a FREE tool for tracking both your net worth as well as income and expenses.

Do you focus on income or net worth? What are your reasons?