Wealth is the total value of all your possessions. It is different from income which is an inward flow of money such as wages, benefits, pensions or interest on savings. Wealth is the value of your assets less any money you owe on loans or mortgages for example.
Review What is Wealth
- The most valuable possession is often your house or home with your chattels or furniture and fittings.
- Other investments including shares, Isa accounts and unit trusts.
- Savings including deposit accounts, premium bonds and other cash savings.
- Assets such as cars, land, antiques and personal chattels.
- Pension funds and whole life insurance policies are a part of wealth even though they are often hard to realise into disposable income.
- Skills and future hope value are personal assets but do not constitute wealth until they are converted into the tangible
Review What is Income
- Earnings from your own efforts as an employee or business owner.
- Wealth can generate income in the form of dividends on shares, interest on savings and rent on property.
- Trading by buying and selling or disposing of assets on ebay will generate income.
- State and local authority benefits are a form of income to supplement the incomes of those with highest need.
- Income is generally subject to taxation in the form of income tax collected as PAYE or self assessment
Wealth is not Fixed
- In the UK wealth is very unevenly distributed with 50% of the population owning 98% of the marketable wealth largely driven by property.
- Rich is often seen as a synonym for wealth. A Lib Dem proposal for a mansion tax on the rich who own a house worth over £2m is one of the few proposals for a wealth tax.
- Inheritance tax is designed to tax asset transfers on the death of the owner.
- The global economy has made ‘Wealth’ more internationally mobile and it is harder for tax authorities to track than income.
- Liquidity can be a determinant of wealth. You need to be able to access the value of an asset. A distressed sale can seriously damage your wealth.
- Asset values can vary significantly based on supply & demand and market conditions.
How to Increase Wealth and Income
- To increase income you may have to work smarter, longer, harder or in a new role.
- Sweat your assets to earn more rent, interest or dividends.
- To increase wealth you can underspend your income and invest or save the surplus.
- Wealth goes to wealth if you can get your assets working harder than inflation. Investments in stocks and shares or land & building improvements are ways
- Trading assets by buying and selling are a key way to increase wealth but the opposite can also be true.