The Money Lie about the Yearly Income
"I make $50,000 a year. I'm about to buy a new house." Whenever I get paid, I never look at the gross income. I always look at the net income. Why? Because that's the money I take home. Looking at your gross income can be depressing when you compare it to the net income. The harder you work, the sadder the comparison becomes. There are many people in financial trouble because they run their numbers according to their gross income. When you apply for a loan or get a credit card, they even ask for the gross income. So, you may be making $50,000 a year, but you're taking home about $38,000. So, this person walks around with their chest out, spending money like they're taking home $50,000. This is why these folks get into serious debt. For those of you who read the book Rich Dad, Poor Dad by Robert Kiyosaki, he focuses on cash flow. This means: Take home pay - Expenses = Whatever's leftover. This is your cash flow. Now, if I take home $38,000 a year, but I a...