Pass these Tests to Build Wealth

BuildWealthAccording to Nerdwallet, the average American Household Credit Card Debt was a whopping $15,762. There’s a lot of things that $15.7k can buy and I can’t help but wonder what they spent their money on. Maybe the utility they got from buying the product or service was worth it, I don’t know, so I won’t judge. Instead, I will go over some of the tests you could run to make sure that you are on track to build wealth, instead of losing it.

Failing a few of these tests here and there for necessary purchases will just be bumps on the trip but you will still reach your destination. Consistently failing the majority of these tests is a sure fire way for your net worth to trend downhill.

Is Your Cash Flow Positive?

By now, you have a budget that tracks everything and anything related to dollars flowing out and flowing in. You also understand it so well that as soon as someone mentions the word budget at a grocery store, you immediately think of the number that you are allowed to spend for that trip.

You also know which portion of your budget are fixed costs and variable costs and areas that you should be saving on to insure maximum increase in net worth.

The Test

You run your budgeted expenses against your earned income for a given period in time (I like to use the past month) and you come up with the difference. The number doesn’t matter greatly but the nature of the number matters. Is the number positive or negative?

If the difference is negative for an extended period of time (say, 6 months), then you are headed straight to debtor’s island, where you are slowly making someone else rich with spending money that you don’t have with hopes that the stock market will be on fire and return 10,000% the year before you hope to retire. This is beyond risky.

A dollar saved is not a dollar earned. Because of the ability to invest that dollar, a dollar saved is a dollar plus its interest earned. This is why the actual number that represents the difference between income and expenses doesn’t matter too much (it still matters) but the nature of the number matters more.

A positive number will increase your net worth by a much higher amount over the long haul, a negative number will decrease your net worth by a much higher amount over the long haul. This could be why the spread in net worth between the 1% and the 99% is getting higher. Lack of investment and savings!

How Much of Your Credit Card Bill Are You Paying?

This is a no-brainer. If you’re only paying the minimum on your credit card bill, it’s a sign for trouble. Credit card debt is one of the worst debt that you can ever have. Its interest rate is in the double digits (it’s hard to even get double digit returns in the stock market, but the credit card companies are consistently raking in double digit returns if you only pay the minimum! Provided you don’t default).

The Test

Do you only pay the minimum? If you can only pay the minimum amount on your credit card bill, that means you are buying stuff that you can’t buy with straight earned cash. A good psychology trick to use to make sure you can afford the item you are buying is to only use cash for a day, a week, or a month. Then you can really find out whether you can afford to purchase the product. If you can, then you can continue to use a credit card, if not, it’s time to let go of the trusty plastic.

I’m a big proponent of credit cards. I currently have 5 and am eyeing a few more to maximize the rewards that I could get. Plus I really love the 25-30 interest free grace period of 25 – 30 days that’s inherent in all credit cards. My FICO score is in the 760s, I have never missed a payment, and I am not in debt. I racked up about $325+ worth of cash back rewards over the past 2 years for spending money on items that I would have bought even without the rewards.

If you use credit cards correctly, it can act as a huge tool for being paid to spend money on things you were going to buy anyway. I only use my credit cards when I’m buying stuff that’s deemed as an absolute necessity. My credit card bill will be high this month (somewhere in the $1000s) it’s expensive moving into a new city, getting insurance, and buying food, but I expect to keep it below $600 all in per month going forward.

I never stress over my credit card bills because of a quick and simple test that I run. I assume that (unless you are making minimum wage and supporting a family) the wage that I earn is enough to cover any planned and necessary life expenses, such as food, insurance, and rent.

Every time that I come to a buying decision I ask myself whether the product is necessary for my survival. If I can wake up tomorrow the same way I woke up today, I don’t deem it as a necessity and have to see if I have enough in my “miscellaneous fund” budget.

Do You Have Everything Needed to Survive?

To survive means that you are able to wake up the next day with your health intact, a place to live, food in the fridge, and insurance. If you are missing any of the things that you need to live, then it’s a troubling sign. This could mean one of two things.

1. Income isn’t enough to support the spending habits

2. Spending is too high

It’s shocking to me how some of my friends spent a lot of money on alcohol and eating out during college when they weren’t working and had no consistent forms of income. I just hoped that all of their necessity were paid for or maybe that good ol’ mom and dad gave them everything they wanted.

This test is the most important test out of the three tests because it determines whether you can sleep soundly at night or not. Not sleeping soundly can lead to stress building, lower health, and a dread for the next day. Take care of yourself and your wallet will thank you for it. You are the biggest asset that can generate income for your bank account!


With examples of what to do to increase your net worth, I wanted to show tests you could run to ruin your net worth so you don’t do them. Avoid failing these tests consistently and it will help you build your net worth!

Readers, what are some tests you run to make sure that you are on the right path? Is there any other behavior that you avoid to make sure you are going in the right direction? Let me know in the comments below!

Finance Solver

I grew my net worth to $40,000 as a college student through hard work, discipline, and a little bit of luck. I graduated college in 2016 and will be starting to plan for my retirement once I start working.I am planning on reaching financial independence by my early 30's and I will document my moments of inspiration all the way to desperation here.

My goal is to enable your success in personal finance so that you can realize the American dream. The first step is starting today!

Read more about me here.

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20 thoughts on “Pass these Tests to Build Wealth

  1. Finance Solver I’m the same way. Love utilizing credit cards for their great reward sign-ups and make sure to always pay on time, never overspend to the point where I am outside my budget, and of course never miss a payment. When used responsibly credit cards an excellent tool!

    • Finance Solver says:

      Exactly! The #1 problem isn’t the fees or the credit card company’s profit hungry outlook, but the consumer’s discipline levels. Racking up credit history and score has been an extra nice feature as well.

        • Finance Solver says:

          The sign up bonuses are ridiculously great. I just got a Visa Freedom card and a 150$ sign up bonus for spending 500$ on things I was gonna spend anyway. 30% risk free return in just 3 months? Sign me up!

          • And that’s the key, the spending has to be spending you would normally do. I’ve been signing up for travel rewards cards recently. I got 50,000 points from Delta’s Amex Gold Card and another 50,000 Chase UR points from the Chase sapphire preferred card. Valuable stuff!

          • Finance Solver says:

            Exactly! Sounds like you’re taking advantage of them very well. The next stop in my credit card vault are travel rewards cards. Maybe in a future post you could explain some of the credit cards you use!

  2. Investing and credit cards, something people cannot seem to grasp despite the wealth of information online. I am somebody who pays off my card the moment I see a bill on it and always ensure I have the cash in the bank at that the time of purchase to pay it. I hate seeing a balance haha

    • Finance Solver says:

      I don’t like how the credit card industry is seen as a money grubbing evil corporation when they are doing everything they can do help consumers out if done the right way. However, being educated about CCs is essential to understanding their position. That’s awesome that you pay off your balance every month. Using them the right way! They can act as such great tools.

  3. I don’t swipe a card unless I know I can pay it off in the future. It is like cash to me but with the free rewards they provide you. Unfortunately, not all are the same way. I like this test because it is simple and easy to understand for those who are not financial literate. This test isn’t designed for us or for others in the community since we are all pretty on top of our finances. But it is a great tool for those who are looking for where to start or identify what the problem potentially is. Thanks for taking the time to put this together!


    • Finance Solver says:

      That’s awesome. It could have also served as a reminder. Even though I know it’s common sense to pay off all your credit card bills, I occasionally forget that I shouldn’t be spending as much on non essential things (it doesn’t happen often but really liked going to other blogs and reading about it to remind myself). No problem! Always looking to provide value to the readers 🙂

  4. That credit card stat is scary, but folks with that much debt can right the ship and get their finances back in line with a few tweaks. It’s not easy, but nothing in life worth doing is. Thanks for the post Finance Solver.

    • Definitely. We live in the most developed country in the world with plenty of opportunities to adjust and get our life on track. Just being in the country is winning the lottery, all about what someone makes out of it. Thanks for stopping by!

  5. We deliberately don’t have a credit card and probably never will, we’re trying to avoid debt as much as possible. We try to earn as much as we can, save as much as we can (whilst still having fun) and invest. We should be alright 🙂

    There is a gigantic amount of money ‘wasted’ every day around the world, but it helps a lot of big companies make money, so they’ll keep advertising.


    • Finance Solver says:

      Always a good choice! I always try to avoid debt where I have to pay interest, it’s free money that I don’t want to give away. I think that’s a fantastic philosophy to have. All of the personal finance advice can be boiled down to those 3 things that you’ve mentioned. It’s simple yet not mainstream.
      There definitely is a lot of money wasted in the world. I see my coworkers justifying small expenses with “it’s only $3 and I got paid today” and that wasn’t a lifestyle that I wanted to have. Those three dollars can add up to huge numbers when you take into account compound interest!

  6. We utilize credit cards for rewards, but I track our spending on each card and we pay them off each month. Two things that really keep us on track are using our receipts to track our spending and income each month (to make sure our spending < income) and subtract bills out of the checking account before they are debited (essentially we live on the prior months income). Great tests, btw!

    • Finance Solver says:

      That is fantastic. Some of my friends have told me that it’s too much work to keep track of expenses and income but to me, whatever work you put in, you get to reap the rewards and I will gladly put in the work to keep my finances in control. You are doing exactly that so that is great. Your expense numbers in your budget are looking like they are minimized very well. Thank you! I do these tests to make sure I am on track!

  7. I’ve mostly use credit cards to pay for expenses because of the reward benefits, but have always paid off the balance for 20+ years running. If you have an outstanding credit card balance, you will never be able to save anything until it’s paid off.

    I also target saving 20% to 40% of after-tax income. Doesn’t always happen, but especially when I started working, my expenses were low. I could save all my increases and bonuses without impacting lifestyle.

    • Finance Solver says:

      Sweet, your credit score must be through the roof. I don’t understand how people are more inclined to spend because it’s plastic and not physical cash. The psychology behind it must be complex.

      20 – 40% is an awesome number. I’m going to target around 40 – 45% of after-tax income because the city I live in is really cheap and I currently don’t have a family. Saving and investing is a sure fire way to win.

  8. $15762!!! that’s a big concern.
    If you can’t afford to pay the card off monthly then you need to lower your available credit.
    I had a rule of thumb that I only had two weeks worth of pay as my available credit.
    It all comes down to living within your means.
    It is such a great feeling not to own a credit card now

    • It’s no wonder why money is the #1 cause of stress.
      I think it’s genius that credit card companies are understanding human psychology so well that they are making money off a piece of plastic but that just means that consumers have to be smarter and more disciplined to keep up. I have numerous credit cards with combined $30k limits and have never not paid off a balance in full.
      Not having a credit card can definitely take off the stress!

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