Oct 03 , 2022
Let's get personal!
Income and assets are both vital to our financial health.
We earn income from our employer, through entrepreneurship, or from our investments. Assets are things which have value like cash, a business, or real estate. Cash as your only asset has disadvantages. Investments without cash also has its disadvantages. Together, they're powerful!
I think this tip is important, because we live in a society where up until recently, we only talk and teach about income. We hear going to college is all about earning a livable wage and making a career. We've put an emphasis on making six figures, then making more than six figures. What's the average salary in our chosen fields? Should we negotiate our salaries? What should someone be making if they went to college or didn't go to college. There's always this comparison.
There's this statistic that talks about a person with a college degree makes a million dollars more over a lifetime than somebody who only has a high school diploma. We've grown accustomed to having these conversations about income. Very rarely, and almost never, do we have a conversation about assets. The only time assets even come into a financial conversation are when we're discussing celebrities. We hear Rihanna, Kylie Jenner, Jay Z and Diddy are worth a billion dollars. Or Googling "what is (insert celebrity name)'s net worth?" But even when we see those headlines, very few people recognize what that means.
Oftentimes, young people AND adults confuse a celebrity's worth with how much money they actually make. Let's discuss a little about what this really means.
Our income is what we get paid. If you work a job, and you make $60,000 a year, that's what you create your budget around spending every month. But your assets, your net worth, are what you own minus what you owe.
Both of these things are important, you need both. Income is important because it allows us to pay our bills. And if we save properly, we're able to invest in assets. Assets are important because good assets, appreciate in value. And then we can use that appreciation to invest into other assets. We can also use those assets to make more income.
For instance, if we have a rental property, the value of that rental property could appreciate in value, and then we could also earn rental income. Now, having one without the other is problematic. If you have income and no assets, you're just spending your money or saving some of your money in a savings account that's not earning you any interest. You don't gain anything from it.
These are the topics we discuss with our Super Money Kids in our programs. Feel free to leave a comment with any questions or thoughts on incomes and assets. We also encourage you to learn more about our Super Money Kids Digital Program to get a jump start on starting these conversations at home.