High Income Low Net Worth

High Income Low Net Worth

Most of the people in our world consider high income, the high net worth. I mean most of the people around the world consider their income as a wealth. And this is the reason behind their financial struggle.

In reality, Income & Wealth both are the different things. Income is something that you make every month from your job and Investments such as Interest, dividends, capital gains, rental income, Business income ..etc.. while the Wealth is something that you accumulate.

High Income people are not necessarily wealthy people. Because most of the time, to realize the high Income, you have to pay more in taxes and thus compromising with the wealth.

Let us discuss 2 examples of Mr.Smith & Mr.Eric. Smith earns $ 90,000 a year while Eric earns $ 2,00,000 a year. Even though Eric earns more than twice that of Mr.Smith, the net worth of Eric is just $ 6,00,000 while the net worth of Smith is $ 4 Million.

You will now ask that what is the reason behind this much of difference in wealth? Even though Smith earns much less than Eric, his net worth is 6.5 times more than Eric.

This is beause Eric is just the high income but low net worth person. He spend most of the money he earns. And on the top of that, to fuel his luxurious lifestyle, Eric has to realize more income every year and thus he has to pay almost twice amount of tax than Mr.Smith.

Smart people are those who pay less in taxes (Legally) and accumulate more wealth. Wealth has to be accumulated. If you don’t accumulate it, you can never be rich and wealthy…