How it works
Wealth can be built in various ways, almost all of
which rely on income. Inheriting money, property, or
other assets is the fast track to wealth, but for anyone
who does not have an inheritance, savings and
investments are the two principal strategies. Income
can be earned in two main ways. The more common
route is via active or earned income, such as wages,
which usually involve a degree of exertion to generate.Earning sufficient income to ensure regular savings and investments
is the basis of building wealth. The more sources of income the better,
especially if some of those sources are passive, or unearned.Generating income
Passive income includes rent from property and
portfolio income, such as dividends from stocks and
shares or interest from bonds. Regardless of the source
of income, if an individual’s earnings are not high
enough to cover expenses and still have some left over,
it becomes almost impossible to build wealth. With
this in mind, any goal of becoming wealthy must be
underpinned by a strategy for generating and
sustaining enough income to allow savings.Earning
active income
Money is received in
exchange for work. Services
are performed for an employer,
client, or customer in return
for financial reward in the
form of salaries and wages,
tips, commissions, or other
forms of income.US_158-159_Generating_income.indd 158 13/10/2016 16:19