The Difference Between Income & Wealth Explained | Titan



The Difference Between Income & Wealth Explained | Titan

While they are related, wealth and income aren't exactly the same thing. In this quick video, Titan's own John De Yonker explains the difference.

Video Transcript

Though we often use the terms wealth and income interchangeably, they actually measure quite different things. Wealth refers to the total value of assets owned by a household or a person, company, country, so on, minus your debts. So wealth, again, is assets minus debts. Assets can be a bunch of things. They can be physical like a home, or they could be intangible like a stock. Wealth measures the accumulation of valuable goods and resources at a point in time. Now, income, on the other hand, is the inflow of money a household receives, like wages for employment or dividends from investments. Now, let's walk through a quick example to really drive home the difference in wealth and income. Let's say you have a friend that graduates school, goes off to be a banker with a very high income, call it $250,000. Paychecks are coming in and they're actually quite sizable. But on the weekends, this friend is partying. They're going to Miami, and at the end of the month, there's very little left over. Now, let's take it on the other side. You have a friend that's a teacher. Modest income, but they're saving. They're buying stocks each month. They're paying down their mortgage. They're building up their asset base. Now, if we fast forward this story 30 years from now, income and wealth may still look quite different. However, your friend that's a teacher, that's been buying assets, is actually going to be wealthier at the end of the day.

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