Wealth & Income Are Not The Same

Hillary Hoffower

 A woman who studied 600 millionaires says there's a misconception about wealth that just won't die

Wealth does not equal income, but people often mistakenly think they're the same thing.

Wealth is the net worth of a household, whereas income is what's reported on an income tax return.

Being rich isn't about how much money you make or spend — it's about how much money you keep. ...

There are a lot of myths about wealth, but one seems to strongly persist: The idea that income equals wealth.

"It continues to be the assumption of those who increase consumption as their income increases that they are the same," wrote Sarah Stanley Fallaw, director of research for the Affluent Market Institute, in her book, "The Next Millionaire Next Door: Enduring Strategies for Building Wealth, in which she surveyed more than 600 millionaires in America.

She added: "And believing this myth gives the false perception that those who appear to be rich (neighbors driving luxury cars or friends in $200-plus jeans) are wealthy when in fact it only means they spent more than real millionaires on these purchases."

Point blank, income and wealth are not the same thing.

Wealth refers to the net worth of a household, i.e. all of its assets minus of all its liabilities, Stanley Fallaw explained. Household income is merely realized income to be reported on one's personal income tax return.

Even the Tax Foundation gets it wrong, referring to "millionaires" in terms of their income tax returns versus their net worth, Stanley Fallaw said. In reality, a millionaire's income is only 8.2% of their wealth, she found through her research.

This myth is problematic, Stanley Fallaw added, because it "distorts" the numbers people focus on when trying to achieve financial independence.

Wealth isn't about how much money you make or spend — it's about how much money you keep

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