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Wealth has also been defined as "the amount of time an individual can maintain his current lifestyle for, without any new income." For example if a person has $1000, and their lifestyle dictates $1000 per week of expenses, then their wealth is measured as 1 week. Under this definition, a person with $10,000 of savings and expenses of $1000 per week (10 weeks of wealth) would be considered wealthier than a person with $20,000 of savings and expenses of $5000 per week (4 weeks of wealth).
The difference between income and wealth
Wealth is a stock that can be represented in an accounting balance sheet, meaning that it is a total accumulation over time, that can be seen in a snapshot. Income is a flow, meaning it is a rate of change, as represented in an Income/Expense or Cashflow Statement. Income represents the increase in wealth (as can be quantified on a Cashflow statement), expenses the decrease in wealth.
If you limit wealth to net worth, then mathematically net income (income minus expenses) can be thought of as the first derivative of wealth, representing the change in wealth over a period of time.
Read more...[caption id="attachment_1131" align="alignright" width="173" caption="Photo by Jeff Belmonte"][/caption]
Wealth has also been defined as "the amount of time an individual can maintain his current lifestyle for, without any new income." For example if a person has $1000, and their lifestyle dictates $1000 per week of expenses, then their wealth is measured as 1 week. Under this definition, a person with $10,000 of savings and expenses of $1000 per week (10 weeks of wealth) would be considered wealthier than a person with $20,000 of savings and expenses of $5000 per week (4 weeks of wealth).
The difference between income and wealth
Wealth is a stock that can be represented in an accounting balance sheet, meaning that it is a total accumulation over time, that can be seen in a snapshot. Income is a flow, meaning it is a rate of change, as represented in an Income/Expense or Cashflow Statement. Income represents the increase in wealth (as can be quantified on a Cashflow statement), expenses the decrease in wealth.
If you limit wealth to net worth, then mathematically net income (income minus expenses) can be thought of as the first derivative of wealth, representing the change in wealth over a period of time.
Read more...
[/caption]
Wealth has also been defined as "the amount of time an individual can maintain his current lifestyle for, without any new income." For example if a person has $1000, and their lifestyle dictates $1000 per week of expenses, then their wealth is measured as 1 week. Under this definition, a person with $10,000 of savings and expenses of $1000 per week (10 weeks of wealth) would be considered wealthier than a person with $20,000 of savings and expenses of $5000 per week (4 weeks of wealth).
The difference between income and wealth
Wealth is a stock that can be represented in an accounting balance sheet, meaning that it is a total accumulation over time, that can be seen in a snapshot. Income is a flow, meaning it is a rate of change, as represented in an Income/Expense or Cashflow Statement. Income represents the increase in wealth (as can be quantified on a Cashflow statement), expenses the decrease in wealth.
If you limit wealth to net worth, then mathematically net income (income minus expenses) can be thought of as the first derivative of wealth, representing the change in wealth over a period of time.
Read more...
