Wealth is greater than income

One of the biggest points that I like to highlight in money conversations is emphasizing the difference between wealth and income.

Wealth is defined as your net worth; the total value of all your assets, minus your liabilities. Income is defined as your salary; the money you receive in exchange for your time/goods/services. Unless you’re got a huge inheritance, wealth takes a lot of time to acquire. Income, however, is earned immediately.

Oftentimes, these words are used interchangeably. We see “indicators of wealth” in the girl carrying the Gucci purse or the guy driving a Lamborghini. I feel like half the reason for some people to purchase these high-end goods is to show off to others that they are indeed wealthy. These aren’t indicators of wealth. In many cases, they’re not even indicators of a high income. There’s an entire category of products called “affordable luxury”, which are products that are, price-wise, within the means of most paychecks, but still give the aura of being really expensive products (I’m extremely guilty of shopping in this category).

A few weeks ago, I noticed this tweet on Twitter that stated, “If our net worth was displayed on our foreheads for all to see, libraries would be mobbed and used cars would be status symbols.” That’s the perfect sentence for me to sum up how I feel about wealth vs income. That’s why I think the best thing you can do for yourself with your money is pay yourself first. Get rid of debt, and put money into savings and investments. That’s how you build up wealth, and future you probably needs the money more than you do right now.

There’s definitely some inherent bias in this post because I’m pursing fincial independence and early retirement, but focusing on wealth has totally changed my perspective on life. When I first started working, my biggest career goal was to have a six-figure income before 30. I wanted to maximize my earning potential before I could get distracted by the prospect of having kids and settling down. I spent paychecks buying Kate Spade (which I still love, shhhhhh), eating out regularly with friends, and buying more expensive products to suit whatever needs I had at the time (like for a 10-day camping trip to Iceland which cost me over $2,000). I was making $60,000, which felt like a lot, but I was spending a good chunk of it, as well. The only reason I was able to make such headway towards my debt and retirement was because I was living at home for my first year of work, which saved so much money.

Now that I’m focused more on building wealth, I care about how I’m spending my paychecks. I’m maintaining a 50% savings rate, and my income has grown, too. I still want to reach six-figures before 30; in fact, I now want it to happen before 28. My student debt is almost done, and when I do finish, I’ll have a net worth of about $55K – not bad for three years in the workforce starting from -$35K. In the meantime, it hasn’t all been penny pinching. Since grad school, Ian and I have made a goal of taking at least one international trip a year, which has been incredibly enriching (we’ve got this year and next year already figured out). Pursuing wealth is not mutually exclusive from pursuing income, but pursuing income can sometimes be detrimental to building wealth.

Above all, keep in mind that wealth is greater than income, but it does not define our personal worth. It’s easy to get distracted when all we want is the end goal – becoming a millionaire, quitting our 9-5, etc. Especially in a blog like this one, where money is the featured topic, it’s important to always remember that personal finance is personal. You can read what I have to say, benchmark against me, borrow ideas, or argue against them, but what we do with our money is our own responsibility. Like I wrote in a guest post for Epic Quiver, there has to be a line drawn between your money and someone elses. Don’t let a stranger’s ‘showcasing’ convince you that you need luxury items to be well off, and don’t let anyone guilt you for having things you like, either. Educate yourself on the difference; it’s all I ask.

How do you view the difference between wealth, income, and to a greater extent, worth?


4 thoughts on “Wealth is greater than income

  1. Ahhhh, good point. It’s sad when I see people with insanely high incomes who have to continue working their lives away, spending money on things that don’t matter. The idea of true wealth didn’t occur to me until a few years ago. Now I’m paying off debt like it’s my job, with the hope that I can have positive net worth some day. 🙂

    Liked by 1 person

  2. One very important part of wealth is that it produces income. With your day job, you trade time for income. With your wealth (or net worth), you trade nothing and build passive income. At some point, you have enough wealth that generates enough passive income so that you can stop trading time for income at your day job


  3. The easiest path, the one I took, was select a high income career you would do for free because it is that fun and live on much less than to earn. Only possible drawback was work was way too fun to quit even after I achieved FI. But eventually it got less fun and I walked away. And life is pretty darn awesome again! I say it is the easiest path, but only if you have the characteristics necessary to do something lucrative that most can’t. In my case it was to excel as a chemical engineer. Only a handful of people can master that field. Same is true for medical doctors and some other fields. It doesn’t have to be a brainiac field, it could be exotic welding or done other complicated task that requires dexterity, but if you can maximise your income potential by developing rare skills then achieving wealth is very easy. Otherwise it is still possible but requires stronger discipline. Great post and thanks for helping many change their futures.


  4. I think what many people have trouble with is lifestyle creep. In theory it’s easier to save when you have more income, but sometimes having more income makes it more difficult to save. In “The Millionaire Next Door,” the authors talk about doctors and lawyers who are broke because they buy big homes, flashy cars, etc. The trick is to have a high income and a high savings rate – much easier said than done!


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