Why your income is not your wealth
Very often we confuse income with wealth, thinking that if we can earn more, we will be wealthy. However, the two have little correlation. If we earn a lot of money and spend it all, we are not wealthy — we are simply living beyond our means.
Hard working and high-income people can be living pay check to pay check, not accumulating any wealth,
while hard working people with a modest income can accumulate great wealth. Let us explain how.
Ricky and Hani work in the same company. In fact, Ricky is the unit manager and earns AED 30,000 per
month, while Hani is one of the executives in his team and earns AED 20,000 per month.
With this information we can easily think that Ricky is richer than Hani. Even with outside appearances Ricky looks wealthier. Ricky walks into the office every day with a cup of expensive coffee or a smoothie, orders his breakfast and later his lunch from different restaurants. He likes to catch up with his friends after work and hangs out with them in one of the trendy venues for drinks and dinner.
When he started work, he used to stay in a modest apartment in Karama but with every salary increase he upgraded his apartment and today lives in a high-end place Downtown. He upgrades his car frequently and today drives a Porsche Cayenne. He has a collection of expensive watches and wears designer clothes to work.
This is how their monthly accounts look
“Money in flow is income; money stored is wealth”
By contrast, Hani is living a modest life and is conscious about the future. At the beginning of every
month, Hani puts aside part of his income for savings. Savings in bank deposits, in regular investment
products and for travelling and holidays. These savings and investments have been growing over time and
Hani can be considered as a relatively wealthy person.
For Ricky, the month begins with payments for his car loan and for his personal loan that was taken out to
consolidate and pay off the outstanding money that had accumulated on his numerous credit cards. And by
the end of the month, he has a few thousand dirhams left in his account. Ricky has very little to show in
terms of savings and cannot be classified as a wealthy person.
Ricky's motto in life is clear: "live a kingsize life and enjoy the present moment". Hani is concerned about early financial independence and does not mind compromising his lifestyle today for a better tomorrow. His motto in life is: Time to save money is when you have some. Wealth is not directly related to income. Wealth is a function of planning and acting for the sake of your future.
What are you doing today to become wealthy?
