Your income does not equal to your wealth
March 17, 2021
In today's blog, we are looking at something really interesting. The difference between wealth and income, we know people associate people who are wealthy with the possibility of having more income and vice versa.
Wealth can be simply seen as the value of both capital and assets that you own. So the capital part can include cash at hand, in the bank, and even money owed to you, while the assets part involves all the securities or investments you have made, property that can be sold for capital, and even intangible things like a brand name.
Income on the other hand is the amount of money you make within a specific period in time. A good example is a salary, if you earn 2000 cedis every month as your salary you can call that your income per month.
You can see that they can be related in the sense that your income contributes to your wealth. However, your wealth does not necessarily increase as your income increases, for instance, if you owe money and you are paying a part of that with your salary then your wealth is actually not increasing as you pay off your debt.
Another illustration is if you are retired, you might have saved up a lot of money over time which is now your wealth but get little or nothing from the government and so it does not correlate with how much wealth you have.
That being said, the goal for everyone should be to grow their wealth and this involves making sure your income is growing and you have little to no debt at all. Doing this would ensure a great upward relationship between your income and your wealth.