How_Money_Works_-_The_Facts_Visually_Explained

Income and wealth

Two of the key concepts of personal finance, income and wealth,

represent different states of an individual’s finances. Income is

moving and often unstable, while wealth is mainly static and stable.

Income

Income is money that flows into a household.

It is used to pay for housing, bills, food, and other

essential needs as well as nonessentials

such as vacations.

Turning income

into wealth

Unless they inherit a large sum of

money, or win it in a lottery, most

people need to rely on creating

wealth through savings. The formula

is simple but requires patience and

discipline. The amount of money

going out each week or month

(outgoings) must be kept lower

than the amount coming in (income)

over the same period, and the

difference should be saved and

invested as soon as possible.

Earnings

Income also includes any

benefits or tax allowances as

well as returns on investments.

Costs

Household expenditure can be

regulated via a budget, which will

help pinpoint where economies

can be made.

INCOME (AFTER TAX) OUTGOINGS

FOOD HOUSING

TRANSPORTATION CLOTHES

SALARY

SHARE DIVIDENDS

RENTAL INCOME

INTEREST

$

$

$

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