We all want to make more money – that’s why you’re reading this article. Yet while many of us went to college or started successful businesses, we still struggle with figuring out how to move past living paycheck to paycheck or generating enough income to move into being “wealthy.” After all, if you need to “work” to meet your financial needs, you’re not wealthy.
Defining wealth versus income
Official definitions of wealth include having an abundance of money, valuable possessions or material things. But this doesn’t quite cut the mustard. Taking it a step further, wealth for our purposes is defined as having enough of said money and valuable possessions to preserve your current lifestyle without having to work to do so.
Income, on the other hand, can simply be defined as earned compensation for performing a service, selling goods or property. Passive income is also included, which would include income earned from financial investments.
Here are two women as examples:
Sally makes $100,000 a year (aka a six-figure income) but is by no means wealthy. She makes just enough to cover the rent on her expensive New York City apartment, pay student loans, cover the minimums on her credit card payments, pay groceries and has a little saved for a rainy day.
Rebecca on the other hand makes the same $100,000 a year but has managed to save prudently while maintaining a modest lifestyle. Though she makes a handsome salary, she’s chosen to live a debt-free life with $2 million saved from various investments. She can easily choose to retire now and live on roughly $57,000 for the next 35 years without needing to work again.
The lesson? While Sally makes a six-figure income, she is just about broke. Rebecca is wealthy. We want wealthy.
Steps to generating wealth
Check out the rest of this article and the steps to generating wealth over at USNews.