Income and Wealth: Almost all of us are doing a job and earn an income Some earn more & others earn less. Even if we see in our organizations where we work, different people have different salaries. We also see some people who draw less but have a good lifestyle. Even some people only earn for their enjoyment. Above all, some people draw more but still have financial issues. Here; is the difference created by the word i.e. “wealth.” Income and wealth are synonymous with each other, but still, there is an enormous difference.
Income and wealth create a difference between rich and poor people. More earners could have less wealth, or fewer earners could have more wealth.
Income is a flow of money that an individual received from his job or business. Income makes use of day-to-day expenses. It can be earned daily, weekly, or monthly.
WHAT IS WEALTH?
Wealth is a large accumulation of money assets with the help of income. Wealth includes individual savings, investments, fixed deposits, property, bonds, and similar assets.
DIFFERENCE BETWEEN INCOME AND WEALTH
- Income is the flow of money in and out.
- It can bring daily, weekly, or monthly.
- Tax levied by the government on your income.
- Income can be increasing once skill potential or by getting a higher education.
- Income does not provide you financial security.
- The source of income is your job. Job ends income ends.
- Income is a kind of flowing water.
- Income does not provide you financial independence.
- Your single source of income does not create wealth.
- Income receives in return for your services.
- Wealth is an accumulation of assets.
- Wealth is accumulating over a period. It cannot be created in a day, month, or a year.
- Tax levied by the government.
- Wealth can be increase by financial education.
- Wealth can furnish your long term financial stability
- It does not depend upon the job. Even wealth can support during financial emergencies.
- Wealth is a kind of reservoir for accumulation.
- Wealth can provide Financial independence.
- Your second source of income creates wealth.
- Wealth is treating as your Net Worth
HOW TO ACCUMULATE WEALTH?
Accumulation of wealth is not e rocket science. High income with more spending does not create wealth. Low income more saving can build wealth over the period. Wealth can be accumulated only with financial literacy, by using the power of compounding and money management.
The simplest way to accumulate wealth is by:
- Save more and make a budget.
- Identify assets and liabilities.
- Do investment by buying good assets.
- Take control of debt.
- Protect your wealth.
Also, there are two kinds of assets:
- Income-generating assets
- Depreciating assets.
Income-generating assets are those whose value increases in time. Whereas, depreciating assets are those whose value decreases in time.
Identify income-generating assets instead of depreciating assets can help you to increase your wealth.
“If you make a good income each year and spend it all, you are not getting wealthier. You are just living high” – Thomas J. Stanley and William D. Danko (The Millionaire Next Door).
We should not be confused between income and wealth. Both are synonymous with each other but are different. The difference can make you rich or keep you where you are. We must focus on wealth rather than on high income. Yes, high income is always good to create more health.
Wealth can be created fast with multiple sources of income. Just like millionaires, you must focus on different income sources like profit income, interest income, dividend income, rental income, royalty income, and many more.