The 5 Numbers You Need to Know to Build Wealth

The 5 Numbers That Build Wealth (0:00)

Bo: When it comes to your money, there are a lot of numbers you could track. Your credit score, your investment returns, your mortgage rate, even your 401(k) balance. But none of those tell you whether you’re actually making financial progress. Today I’m going to show you the five numbers you need to know if you want to build wealth. And once you know these numbers, you’ll be able to see exactly where your money is going, how much progress you’re making, and what levers you can pull if you want to reach financial independence even faster.

Your Greatest Wealth-Building Tool (0:29)

Bo: The first number you need to know is important because it affects every other number we’ll talk about today. And that number is your income. It tells you how much you have to work with as you grow your army of dollar bills and progress toward financial independence. Your income is your greatest wealth-building tool. But here’s the thing. Most people can tell you their salary, but they may not know how much money they actually make. This is what I mean. Your gross income is your salary before taxes and deductions. That’s technically how much you’re paid. But your take-home pay is what actually ends up in your bank account after federal taxes, state taxes, Social Security, and any other benefit deductions. After all those things are taken out, it’s not uncommon for your take-home pay to be 20 to 35% lower than your gross salary.

Bo: If you’re not budgeting and tracking your expenses, you might not even know what your take-home pay is, which means you would really not know how much money you have for paying the bills, buying groceries, or even working toward your financial goals. So if you want to build wealth, the first number to know is your income. And the higher that number, the easier it’s going to be to build wealth. It’s worth putting in some effort to increase it as much as you can. Maybe you build your skills and work toward a pay raise. Or maybe you earn degrees and certifications that can land you a role with higher pay. Or maybe you start a side hustle or do some consulting to supplement your full-time job. Anything you can do to get your income up will give you more to work with as you build wealth.

Where Your Money Really Goes (1:53)

Bo: But it’s not all about money coming in. Once you know what you make, now you need to know where it’s going. So the next number you need to know is your expenses. This includes everything you spend money on in a given month, like housing, transportation, food, entertainment, or even debt payments. And this number is important because it reveals the harsh truth about your financial life. When you actually track your expenses, you can discover spending patterns that are actually working against you. Subscriptions you forgot about, dining out habits that are way more expensive than you realized, or maybe even a car payment that’s eating a big chunk of your paycheck.

Bo: But there’s something I want to be clear about. Despite what you may hear from other personal finance creators, it’s probably not the lattes keeping you from building wealth. Yes, every dollar should have a job. But it’s okay for some of those dollars to have the job of bringing you just a little bit of caffeinated happiness every now and then. If you’re looking for ways to cut back on spending, it’s much more effective to focus on the big expenses like housing and vehicles. According to the Bureau of Labor Statistics, housing and transportation alone consume about 50% of the average American household’s budget, with housing being 33% and transportation another 17%. If you can get those two costs down, you have a lot more money to work with for everything else.

The Secret to Building Wealth Faster (3:13)

Bo: Once you know those first two numbers, your income and your expenses, you can figure out the next number on the list, and that’s your margin. Margin is the gap between what you earn and what you spend. And it’s the single most important driver of your ability to build wealth. According to one study, around 62% of Americans are living paycheck to paycheck. That means more than half the country has little to no margin at the end of every month. And if that’s you, there are really two levers that you can pull to create more margin. You can spend less or you can earn more. And ideally you can do both, because every dollar you can add to your margin is a dollar that you can put to work building towards your future.

Bo: Let’s say you take home $5,000 a month and you’re spending $4,800. That means your margin is $200. If you invested that monthly over 30 years with an 8% rate of return, you’d have just under $300,000. Now let’s say that you increased your margin by lowering your expenses from $4,800 to $4,200. Now your margin is $800 a month. If you invested that amount monthly over 30 years with the same 8% rate of return, you would have over $1 million. Because the bigger your margin, the more you can save.

Are You Saving Enough? (4:31)

Bo: Which brings us to number four, your savings rate. Your savings rate is the percentage of your gross income that you’re saving and investing each month. And this number tells you whether you’re actually on track and moving towards financial independence. According to Federal Reserve data, the US personal savings rate was just 3.6% at the end of 2025. While that’s better than nothing, it is way less than it should be. Our recommendation is that you should be saving and investing 25% of your gross income. That’s the savings rate we found gives most people a realistic path to financial independence. And if that number feels way too far out of reach right now, don’t panic. The first step is to know your savings rate. Then you can get that number moving in the right direction. Even just increasing it by 1% a year until you hit your target can make a huge difference over time.

Bo: And here’s a little Money Guy secret. Your specific target savings rate might not be exactly 25%, because it really depends on how old you are, when you started, and what your retirement goals are. If you want to know exactly what your savings rate should be, check out our free resource called How Much Should You Save?

Net Worth Your Ultimate Financial Scorecard (5:37)

Bo: The fifth number you need to know is your net worth. This is the best scorecard for your overall financial health. Calculating your net worth is pretty straightforward. You list everything that you own, you subtract out everything that you owe, and the difference is your net worth. What you’re looking for year-over-year is progress. Are your assets growing? Is your debt shrinking? Is your net worth heading in the right direction? It can be very encouraging to see the progress and great motivation to keep moving forward. You can even celebrate milestones like hitting a million dollars in net worth or reaching the point where your money is growing more in a year than you actually earn. That’s when your army of dollar bills begins to work harder than you can with your back, your brain, and your hands. Financial independence goes from being a goal to something you can actually start to see on paper.

Bo: If you’ve never done a net worth statement before, check out our net worth tool. This is literally what Brian and I both use to do our net worth statements every single year. Make it an annual habit and you’ll be amazed at how motivating it is to watch the numbers grow.

Next Step: Where to Invest Using the Financial Order of Operations (6:40)

Bo: So that’s it. Income, expenses, margin, savings rate, and net worth. When you know all five of those numbers, it puts you in a completely different position than someone who’s just trying to save a little more and hoping that things work out. But one thing we didn’t cover in this video is where to invest that 25% of your income. If you want to know exactly where to put those dollars, the right accounts and the optimal order, check out the video linked here where we talk about the Financial Order of Operations and share our step-by-step guide. And as always, keep building towards your great big beautiful tomorrow.