Kenkat wrote:I don't understand the statement that it is income that matters, not net worth. Your net worth is a large factor in how much income you can generate. Not all assets generate income - for example you home - but they can be converted to assets that can generate an income, and many other assets DO generate income, so net worth seems pretty important to me unless you will be fully funded by pension and social security income when you retire.
Because people are answering two different questions.
1. Net worth is a statistic. With a well-defined way to compute. And extremely useful to the working class to determine how close they are to Financial Independence.
2. Cash flow is another statistic. With a somewhat less, but still well-defined way to compute / track. And extremely useful to the working AND retired class to make sure they can put food on table, and for those with a mortgage, a place to sleep.
A high net worth individual can almost always convert the net worth into a higher sustainable cash flow versus a lower net worth individual, but not necessarily the next day (indeed, or even the next month), so is less relevant to the retirees or soon-to-be retirees. A high cash flow does not necessarily equate to a large net worth, depending on discretionary expenses.
So, it really depends on the point of view of the respondent: do they care about the ability to have financial independence or are they focused on simply putting food on the table next month?