The Myth of Net Worth and Net Revenue

Net Worth Fail

At first glance you are probably wondering “What does this blog post have to do with the digital nomad lifestyle?” Most of the time when people are talking about net worth and net revenue it’s a financial conversation related to early retirement, wealth management or something along those lines. And you wouldn’t be too far from the truth when you see the topic come up here.

A friend of mine and I were having dinner the other night here in Cancun (we actually had another 4 hour business talk last night after I wrote this post; we meet up pretty regularly to chat about business strategies/growth/travel). We both work as location independent digital nomads; he’s a website designer who also founded and runs Cheap Cancun Rentals (you know him as Hans from ProWebCom), and I’m a freelance writer who also has this company, Marginal Boundaries, along with Complete Writing Solutions and a forthcoming company launching in March. The point is…we were having dinner the other night and we spent a little over four hours talking about our lifestyle, the benefits of being a digital nomad, the realities of early retirement (I’m in my early 30s, he’s in his late 20s, and both of us are effectively retired) and how broken the concept of “wealth” is back in the United States and Canada.

Net worth is something that is talked about a lot back in the “Western” world, but most people really don’t consider what that actually means. To most people in the U.S., wealth is determined by how many possessions you have, and regardless if an item is paid off or not people usually accredit that item as being “theirs”, even if they still owe the bank on the mortgage or the car payment. But the reality is…they don’t actually own it. If they miss a month or two of payments, what happens? The bank shows up, repossesses your house and you are left living out in the cold.

Which is where the digital nomad lifestyle comes into play. Just playing around with some simple numbers that any grade-school child can figure out, if a person makes $25,000 a year after taxes (the median wage in the United States) but has a cost of living that is right at $25,000 per year to cover the mortgage, school loans, car payment and credit card bills, they aren’t saving any money. And they don’t actually have any net worth, because they aren’t generating any net revenue. Without any net…well, you don’t have anything.

“Get to the point,” you grumble, scanning your eyes down the page. Ok. Fair enough. So here’s the grade-school math. If the cost of living in a country like Mexico or Bulgaria or Uruguay or Italy is $10,000 a year…and you don’t have a mortgage payment or a car payment because that $10,000 covers all of your expenses including entertainment…and your average salary is $25,000 a year after taxes…that’s $15,000 of net profit in your bank account at the end of the year.

Now that’s assuming you only make the average, median wage. And that’s assuming you don’t take advantage of the lower taxes in another country. The point is, the more you make, the more you save and the easier it is to achieve that dream of an early retirement. But where you barely break even back in the U.S. with your mortgage payment, rent, gas, groceries, insurances, internet, car payment, house payment, school loans and credit card debt…when you are living abroad as a digital nomad you are bypassing all of that debt and moving straight into the net worth category.

The average U.S. citizen is $300,000 in debt by the time they are 30 years of age. As of 2010 the average cost of a house is $221,000; the average cost of a car is $28,000; the average cost of a four year public university is around $40,000. Meanwhile, in Mexico, for example, the average cost of a three or four bedroom house in the downtown residential areas is $30,000. In addition, universal healthcare costs a mere $250 per year with no limits, free medicine and no deductibles. That’s why the average cost of living here is only $8,000 – $10,000 a year, which is why I’m based out of Mexico. I’m living an upper middle class existence on pennies, because I have no debt and I utilize simple grade-school economics to my advantage.

We also talked about his time spent in the Republic of Congo and the fact that a man there making a mere $500 per month or $6,000 per year actually has more net worth than the average U.S. citizen when you do a straight-up mathematical comparison of the two. In your mind you might be thinking that it’s impossible, but when you eliminate debt out of the equation and stop paying on a mortgage, car payment, credit cards and beyond…all of your extra money goes into that net worth zone, giving you everything you need to retire at the age of 35, or even before you are 30. Long before the 65 years of age the American Dream tells you that you are supposed to wait for.

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About T.W. Anderson

T.W. Anderson is the founder of the Marginal Boundaries brand. He is the writer, editor, videographer, photographer, and social media guru alongside Cristina Barrios, the other half of the brand. In his spare time, he is the creative director of the Saga of Lucimia, a forthcoming MMORPG from Stormhaven Studios, LLC.


  • Roel says:

    Great post, Tim. I came across this as I was researching my own similar post on the the net worth myth recently. It seems we’ve come to very similar conclusions from two slightly different angles.

  • @Will:

    Almost everyone I know who is my age (early 30s) living back in the U.S. is at least 250-300k in debt between the mortgage, house payment and car. My brother among them. And if you ask all of them, they are “rich”, but what’s ironic is that…they don’t actually *own* a single thing. It’s 100% on loan from the bank, through credit, and if they miss a payment, guess what happens? Mr. Repo Man showing up at the door to take back the things you thought were yours.

    Meanwhile, the guy in Africa who might only make $500 a month in currency has a house that is 100% paid for, he owns his land and he doesn’t have a dime owed in credit. Who has more net worth/net value?

    This is a question that a five year old child can answer. It’s grade-school economics, and yes, it’s how I’ve managed to achieve my current position. I had my debt paid off around November of 2009, which was almost two years after I left the U.S. behind, and I’ve been debt-free since then. Now, I’m not completely retired (I still need to make $600-$800 a month to cover my basic living expenses), but for all intents and purposes, compared to those living in the U.S., yes…I’m retired.

    Presently, The Expat Guidebook + the immersion guides and my other eBooks are covering my costs of living. I do put in 3-4 hours a day blogging, doing social media and writing new products/creating new things, but I don’t really consider it “work” in the traditional sense because A) I love what I do and B) there’s no 40 hour work weeks, no boss, no credit, no debt and if I want to take a month off of work I can absolutely do so because my residual income covers my cost of living, just like a pension.

    That’s what I’m currently on a mission to do: teach people via The Expat Guidebook how to achieve a debt-free lifestyle and absolute freedom through independent citizenship as an international expat.

  • Will says:

    Great point Tim,

    Sounds like you are taking into account cash flow instead of all the “stuff” you own. No wonder you’ve been able to retire so early while most people wait to pay off all that debt.


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