Income Is Not Wealth

“A wealthy person is simply someone who has learned how to make money when they’re not working.”

– Robert Kiyosaki


I’ve met a lot of people who equate a high income with being wealthy. In their minds, they are wealthy because they have a high income. They are wrong.

While doing some research last week, I learned that many reporters also assume that a high income equates to being wealthy. They are wrong.

As I dug deeper, I found that entire web-sites and organizations also report that a high income means someone is wealthy. They are wrong.

So let me make something crystal clear; high income is not wealth.



Income is money that is paid to someone. Income can come from a wide variety of sources, but for our purposes, we understand that when someone says “high income”, they are referring to earned income. It is exceedingly rare for someone to say “high income” and mean something other than earned income. Earned income is exactly what it sounds like; wages paid to someone for doing work.


Now let’s consider a few characteristics of earned income.

  1. If a person cannot maintain their standard of living without working, are they truly wealthy?
  • No, they are not. If a person cannot pay their mortgage or put food on the table without a weekly paycheck, then that person is not wealthy. Alice Walton (Walmart) and Phil Knight (Nike) do not have to receive a weekly paycheck to maintain their standard of living. In fact, both of them could go the remainder of their lives without ever receiving a paycheck and raise their standard of living. The lifestyle stops when the paycheck stops for those that require a paycheck. Therefor, a high income is not equivalent to being wealthy.


  1. If a person must work, are they truly wealthy?
  • The wealthy do not work unless they want to work. Bill Gates (Microsoft), Jeff Bezos (Amazon), & Mark Zuckerburg (Facebook), do not have to work … for any reason whatsoever. Work is optional. They only work if they want to work. By its very nature, earned income requires that a person work to receive it. Therefor, a high income is not equivalent to being wealthy.


  1. There are multiple studies which conclude that on average, urban residents have a substantially higher income than rural residents. Most people know this fact. But do you know that there is a similar number of studies which conclude that on average, urban residents & rural residents have a similar net worth?
  • Put 2 & 2 together and a high income does not equal wealth.


  1. There are multiple studies which conclude that on average, management earns a substantially higher income than labor. That fact is often a political rallying cry for multiple people. We hear that refrain so often that we all know it as a fact. What you probably don’t know is that on average, management & labor have a similar net worth.
  • Put 2 & 2 together and a high income does not equal wealth.
  • In my professional experience, around age 60, labor oftentimes has a net worth far in excess of management, more evidence that a high income does not equal wealth.


Being wealthy is something completely different from earned income.

For my purposes, I have always defined being wealthy as the ability to indefinitely maintain a desired standard of living without an earned income. What I mean is that an unemployed person has enough “money” to maintain their desired lifestyle without ever having to enter the workforce and without ever running out of “money”.

Being wealthy doesn’t mean that a person doesn’t work, only that they don’t have to work. Consider Warren Buffett. Technically, he has an annual salary of $100,000, but he also has a daily dividend income of $9,692,359. Obviously, Warren Buffett can live any way he desires without ever lifting a finger. He is at the extreme high end of wealthy, but you get my point.

The unearned income required to be wealthy can come from a variety of sources; dividends, interest, rent, royalties, etc …. The income itself can also be generated from a variety of sources; stocks, bonds, rental properties, promissory notes, patents, copyrights, and so forth. It is these assets that comprise net worth. It is the income they consistently produce, which makes a person wealthy.


People who confuse earned income with wealth are making a grave financial mistake. Believe it or not, that mistake is the reason we see so many high income earners working into old age. Have you ever met a physician that should’ve retired a couple of decades ago? What about an attorney who’s so old he looks like he might fall over dead in the courtroom at any minute? Executives who should have called it quits 15 years ago? The list goes on and one and on. Without even knowing it, you’ve probably met many people who have, and continue to, mistake income for wealth.

One of my favorite experiences was with a professional who came to consult me. By all outward appearances, this professional was wildly successful and very wealthy. In private, I learned that this professional had a Net Worth approaching $5 million, including $0 Debt and a $2 million retirement account. The professional wanted to retire and wished to hire me to advise. Before I even did any calculations, I told this person that (s)he did not have enough money to retire. The professional was incredulous. (S)he had $2 million in retirement. The problem, as I explained, is that the professional’s annual budget was $600,000. The retirement account would only last 3-4 years before it was empty. This professional had spent a lifetime confusing earned income with wealth. When the rubber hit the road, (s)he discovered that the 2 are completely different creatures.

Ultimately, the professional left my office angry. They’ve never come back to see me, but I suspect (s)he finally understood our conversation. (S)he is still working … well past age 70.


Don’t make the mistake of confusing high income and being wealthy or it could be you wondering what happened while you work into old age.


Sapiat Asset Management is an independent registered investment advisor, specializing in financial planning based, asset management for Gen X Individuals & Families and their Trusts & Businesses.

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