The Difference Between Wealth And Income

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I have a few questions for you today, questions about your finances that you have to answer in order to actually find out if you are on the right financial track or not. With whatever you have at the moment or at the rate you are going, if you were to lose your job next month, will you be able to survive? If you were to get injured tomorrow and not be able to work, would you be able to maintain yourself? If you were to die today, what would your kids inherit? Will you have something to fall back on?

Those who earn a lot of money probably had a lot of positive answers because you earn a lot of money right? Wrong! What you earn is not wealth just as long as you use and depending on what you use it for.

As young people we often speak of financial freedom and wealth accumulation, and most of the time we associate that with earning a huge chunk of money. Although when you earn a lot of money you can accumulate wealth quickly, we need to understand that “income is not wealth.”

We usually think that people who have a high income has more wealth and those with a lower income have lower wealth, which is not the case. Wealth creation is not about the amount of money you earn, it is about how much money you save and use to purchase income generating assets. It is about getting other income streams, not another jobs but ways for your money to make more money for you.

When you earn quite a lot of money, you often find yourself in a false sense of security because you are less likely to control the flow of your monthly private spending. You are more likely to fall victim to overdrafts because you know that by the time you receive your next salary the overdraft will be covered, which will never accumulate wealth. I always say this, it is very important to put away some money, it is equally as important to set financial goals and generate wealth from the money you have saved.

When you start saving your money, you need to do so with a goal in mind. Because if you are a sailor and you don’t know where you are going, no wind will ever be favourable right? When you set financial goals no one will ever derail you from those goals, even when people attempt to tell you their financial problems you will not try go in to save them because you know what you want to achieve and you also understand that you actually saving them, will make you fail in the goals you have set for yourself.

 

In order to accumulate wealth, we need to make a lot of sacrifices, try cutting down all the luxuries. Ask yourself every time ‘Do I REALLY NEED THIS?’ every time you are about to buy something. Get your priorities and goals right. Save and use what you have saved to get income generating assets, let the money you make, make money for you.