You Don’t Know the Difference Between Income and Wealth

Every few months a reporter somewhere writes an article headlined “How much you need to earn to be rich”.

If you think wealth (“rich”) is defined by income (“how much you earn”) then let me be blunt: You don’t know the difference between income and wealth. And THAT’S why you’re not rich.

I get on my high horse about journalists misreporting this information, but it does piss me off that people don’t know the difference between Income and Wealth.

Absolutely, making $180,000 per year makes it a lot easier to accumulate wealth and become rich; so the two are related … but they’re different things.

It’s like saying “What level of gym membership makes you a body builder” (none if I never go), or “What size car engine makes you a dangerous driver” (a tiny engine is still a lethal weapon in the wrong hands). There’s a connection, but they’re fundamentally different concepts.

Not understanding wealth is a key reason why most people won’t accumulate wealth. And I’m reminded of the saying “Most people don’t want a million dollars, they want to spend a million dollars.”

If you treat income as money to be spent, then more income equals more flashy trinkets equals being rich. But wealth dictates not spending all your money – a payrise helps, but the underlying behaviour is what matters.

You can get rich on a median income, even less. And you can be broke, or worse, despite earning in the top tax bracket.

My only question is whether the newspapers are flogging this horse out of their own ignorance … or to intentionally keep the masses of the world ignorant about how money really works.

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