Welcome back to my series on cash flow vs. net worth. If you missed the first two articles, you can catch up here and here.
In the first article, I wrote about how my relationship with money has changed over the last year and why cash flow and net worth play different roles depending on the season of life you’re in. In the second article, I focused on cash flow, the four jobs I want it to do for me, and how I evaluate cash-flowing businesses to find deals I’m interested in.
But here’s the truth: although I want cash flow now, and net worth feels intangible and distant, something I could maybe put off, I know I can’t choose one over the other. They have to work together.
This article is me defending net worth (mostly to myself) and walking through why boring wealth still matters.
What Net Worth Means
Net worth = Assets- Liabilities
Below is a table of common assets and liabilities that people will have.
| Assets (What You Own) | Liabilities (What You Owe) |
| Checking accounts | Credit card balances |
| Savings accounts | Personal loans |
| Emergency fund | Student loans (federal & private) |
| Money market accounts | Auto loans |
| CDs (Certificates of Deposit) | Mortgage on primary home |
| 401(k) | Mortgage on rental property |
| Cash value of whole life insurance | HELOC (Home Equity Line of Credit) |
| IRA (Traditional or Roth) | SBA loans |
| Vehicles (resale value) | Business loans |
| HSA (invested portion) | Equipment financing |
| Brokerage account | Business lines of credit |
| Stocks, ETFs, mutual funds, and bonds | Medical debt |
| Business equity | Tax debt |
| Real Estate (Primary home or Rentals) | Investor notes payable |
Assets can be cash-flowing or appreciating. A 401(k) doesn’t produce cash right now, but it compounds quietly in the background. A cash-flowing business can generate income, but it can also carry debt. A car technically counts as an asset, at least its resale value does, but cars depreciate, and most people also carry debt on them.
In my own journey, I’ve done well at keeping our liabilities relatively low. We have a mortgage on our primary home, and I still have student loan debt that we pay each month. Both of our cars are paid off, and we didn’t have any debt on the laundromat until we bought new equipment at the end of last year.
It’s preached consistently in the personal finance space to keep your liabilities to a minimum. But how do you actually start building assets?
Assets
The answer isn’t complicated. Assets are built by spending less than you make and directing that surplus toward things that compound over time. Referring back to the table above, assets can take many shapes. I always recommend starting with the basics: build an emergency fund (we keep ours in a high-yield savings account), contribute to your 401(k) if your employer offers one, invest through an HSA if you qualify, and/or open an IRA for retirement.
To me, that’s the bare minimum. A 401(k) gives you tax-deferred compounding. A Roth IRA provides tax-free growth. An HSA offers a rare triple tax advantage when used strategically. These accounts may not feel exciting, but they are incredibly efficient wealth-building tools.
The next step is choosing an asset class you’re comfortable with and starting there. If you’re anything like me, the stock market can feel intimidating at first. I grew up with parents who were terrified of it, focusing only on stories of people putting all their money into one stock and losing everything. That’s not what I do. I rarely buy individual stocks. Our brokerage account is primarily invested in broad-based index funds. Broad-based index funds are designed to track an entire market instead of trying to pick individual winners. A common example is an S&P 500 index fund, which tracks the 500 largest publicly traded companies in the United States. Over long periods of time, the S&P 500 has historically averaged around 10% annual returns before inflation.
The market is not risk-free. In the short term, it can be volatile. It drops, sometimes dramatically (The Great Depression, 2008, COVID). But historically, it has recovered and continued upward over time.
Broad-based index funds aren’t the only way to build net worth. Real estate, private businesses, bonds, and other investments can also play a role depending on your goals and risk tolerance.
For us, our assets span retirement accounts for long-term compounding, a brokerage account for flexibility, home equity for stability, and business equity for potential upside. None of these replaces a work shift today or buys back days at home with my kids. But they do protect our future and will eventually let me retire.
Budgeting and Saving
Buying assets is where budgeting comes in. You won’t have money left to save and invest if you don’t intentionally allocate it.
I wrote a whole article about this if you want to read it here.
We have multiple streams of income between my husband and me, and from each of them we try to hit at least a 30% savings/investing goal. For us, that means investing in the stock market, each having a Roth IRA, contributing to a 401(k) when available (currently we don’t), and maintaining a high-yield savings account for our emergency fund.
This year, we also started allocating some of our savings into an account specifically intended to grow our business and potentially buy new ones.
Here are my top three principles for making this work:
Treat investing like a bill.
Our IRA and brokerage contributions are automatic, just like our phone bill. You can adjust as needed, but pick a savings/investing rate you’re comfortable with (I prefer over 20%) and stick with it. Make it consistent.
Protect your margin.
Avoid lifestyle creep and consumer debt. If we went out and bought brand new cars and maxed out a $40,000 credit card, our margin would disappear. Control your liabilities, and your ability to invest stays intact.
Separate saving and investing.
In the past, I treated them the same. Any “extra” money was saved (but really invested). Now I keep them separate. Savings are more liquid and meant for short-term use. Investing is for long-term growth. I need both right now.
My income hasn’t drastically changed. I don’t have more money; it’s just divided differently. I’m keeping our savings rate around 20–25% and our investing rate at about 10-15% between my husband and me, bringing our total savings/investing rate to 20-35%.
The risk of ignoring net worth
I’d be lying if I said I haven’t thought, “I could buy more businesses faster if I just stopped long-term investing for a while.” I’ve thought that I have time. That I can always do more later. Maybe that’s true. But cash flow only feels more productive because it’s visible and immediate. Net worth is quieter, but it’s protective in the long term. It builds actual security.
Businesses can fail. Revenue can drop. Markets shift. Life changes. Seasons change. Cash flow can stop. That’s why, even though I’m focused on buying more cash-flowing assets, I’m still maxing my Roth IRA, contributing to our brokerage account, and protecting our savings rate.
Abandoning net worth for cash flow would be short-term thinking. You don’t have to pick one. They solve different problems in different seasons. My kids are little. My time is scarce. I’m buying back time with cash flow. But this will shift again. As they get older and we have more assets to manage, I imagine I’ll shift away from growth mode toward securing our long-term future and building theirs.
Calculate your net worth
When I first started investing, I had almost nothing. We had a mortgage on our home and debt on one of our vehicles. We owned one vehicle outright. I didn’t have a massive portfolio, business equity, or some impressive number to show off. What I did have was a starting point. And that matters. You cannot improve what you don’t measure.
Knowing your net worth isn’t about ego. It’s not about comparing yourself to someone else. It’s about clarity. It’s about seeing the gap between where you are and where you want to be. It’s about watching progress over time, even if it feels painfully slow at first.
When your net worth is small, growth feels invisible. A few thousand dollars doesn’t seem life-changing. But when you track it annually, something powerful happens. You start to see compounding. You start to see debt shrinking. You start to see assets stacking quietly in the background.
If you’ve never calculated your net worth before, do it, even if the number disappoints you. Especially if it disappoints you. Dr. Slater made a Personal Financial Statement that everyone should use, and it’s an easy way to track your net worth as well.
Track it at least once a year, and see what happens.
Conclusion
When I wrote the first article in this series, I called it growing up financially. I think this is what I meant. Growing up financially means understanding that different tools solve different problems. Cash flow solves my current tension: wanting more time. Net worth solves my future tension: the need for security. Net worth doesn’t necessarily feel urgent, and can be easy to neglect. Cash flow is easier because it’s active, feels productive, and lets you see progress. But the bottom line is, I don’t want to wake up ten years from now having optimized cash flow but neglected the foundation. I also don’t want to over-optimize retirement accounts while missing this season with my kids. This season is loud and busy and full of little kids and business ideas and shifting priorities.
So for now, I’m doing both imperfectly. I’m buying time with cash flow and protecting the future with boring investing. It’s not flashy. It’s not extreme. But it feels balanced. The next article will be my attempt to integrate them into a single framework rather than letting them compete, and will show you how to do it, too. Because for me, maturity isn’t choosing one, it’s been knowing how they work together and integrating that plan into my budget.