Would you like to be wealthy some day? How do you think people accumulate wealth? Is it from earning multi-million dollar salaries? From owning expensive houses and cars? Actually, a person can earn a huge salary, live in a mansion, and still have no wealth. When economists talk about wealth, they're not looking at fancy vacations or fabulous parties.
Assets and Liabilities
When economists refer to wealth, they mean the total value of everything a person owns, or their assets. Houses, cars, stocks, and savings can all contribute to wealth. However, to calculate wealth, you don't just add up all your assets. You have to subtract your liabilities. Liabilities are money you owe to other people. Mortgages are a liability. So are car loans, credit card debt, and student loan debt. A person's total wealth is what remains after you add up his or her assets and subtract his or her liabilities.
This means that often the people we consider wealthy are not truly wealthy at all. For instance, many sports stars earn enormous salaries. However, they often have huge debts as well. Meanwhile, the old couple living in the normal-looking house next door may be millionaires. If you want to be wealthy, it turns out that avoiding debt is more important than earning a big salary.
See for yourself: http://www.youtube.com/watch?v=p0YtpxO2I_s
Check out the links below for ways to avoid debt.