[Forbes] To the average American, the title of this post sounds silly. She may wonder, "Isn't someone with a high income already wealthy?" This person has not yet learned a critical distinction and an important lesson in building wealth--income is not wealth. The most common measure of wealth is net worth--everything you own minus everything you owe. It is entirely possible to have a very high income and have a negative net worth. Likewise, it is entirely possible to have a very low income and yet possess vast sums of wealth. Income is not wealth despite how our tax code, innumerable newspaper articles, and the majority of people talk about it.
Even someone financially astute enough to recognize the difference between income and wealth may express surprise that an article like this one needs to be written; "Surely it must be easier to build wealth on a high income than on a low one, no?" The answer to that, of course, is yes, all else being equal. The problem is that all else is never equal. |