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The Truth About High Income Vs. High Net Worth

Working women focus on high income. Wealthy women focus on high net worth.

The difference between the two can determine if you have enough money on hand to live your dreams, start a business, retire early, and transfer assets to the next generation.

The Difference Is Costly

When you’re in a high income tax bracket, you are making a lot of money from your trade, skill, service, or product. The more you make, the more money you pay in taxes. Many people in high income tax brackets spend more money to keep up with the status associated with their high income tax bracket. This habit impacts net worth.

Net worth doesn’t focus on what you make but on what you keep. When you calculate net worth, you have to tally up the assets a person has accumulated. Assets include cash on hand, savings, stocks, bonds, property, precious metals, and anything you own that has value to others in the market. The cash that you have on hand or invested in the stock market is not taxed (until you spend it). High net worth individuals avoid high tax bills that are given to high income individuals so they have a chance to keep more of their money.

The Dilemma is Growing


There is a generational epidemic called diversification deficit or lack of wealth. So many people are going to school to get better jobs but are graduating with mounds of student loan debt. Education is a great thing if you know how to make it work for you. Education should raise your net worth and not diminish it. It should position you to create more assets for yourself and your family.

Fancy degrees and accomplishments have caused many to graduate to a more expensive lifestyle. You may live in a better home but your home is not an asset if your mortgage payments are keeping you under water. Are you a high income individual who can’t keep her eyes off the fabulous deals that come with credit card usage? Be careful. One late credit card payment can raise your interest rates. And only paying the minimum balance will leave you with a bill that never seems to go away.

The Problem with A Single Source of Income

Often we are under the illusion that if our salary is substantial, we think we will have enough funds on hand to do as we please. You often believe that if you can afford it, you should buy it. With high income, you have no real safety net besides a retirement fund (pension, 401k, etc.) This is only accessible before retirement age if you agree to take a penalty.  Only having one asset such as W2 income at your disposal delays your wealth. Why? Because If that one asset fails, you are stuck.

Help Your Kids Become Financially Independent


We all want our children to be healthy, happy and prosperous. We set up college funds with dreams of our children one-day becoming high “income” earners. In our school system, we are not taught about what builds worth. Assets build worth. Income is only one piece of your wealth portfolio.

Typically our children grow up financially ill-prepared and in a worse situation than us. Do you know why? Because we didn’t equip them for economic distress.

Start creating portfolios now so that your children can have a net worth that exceeds their income.

The Answer is Wealth

Wealth has nothing to do with high income. Many people are striving for high income and are neglecting their net worth.

Wealth is made up of a diverse list of assets which work together to provide us with options and resources to live a better life. Learning to accumulate different assets is key to building wealth.

Wealth can only happen through diversification. Anyone can get rich but you can only accumulate wealth through diversification.

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Disclaimer: Wealthy Women Daily is solely educational and informational, and is not intended to give investment or trading advice of any kind. Not all asset classes are suitable for all investors. Wealthy Women Daily is a research academy that provides you with the data and analysis you need to make an informed investment decision. It is your responsibility to talk to an expert to understand how specific investments will impact you during tax time. 



About Charlene Rhinehart, CPA

Charlene Rhinehart is a Certified Public Accountant, Founder of Wealthy Women Daily, and Editor-in-Chief of the Dividend InvestHer and The Wealthy Woman Investor. Charlene is currently the Chair of the Illinois CPA Society Taxation Individual Committee. With over a decade of experience in the financial services industry, Charlene is one of the few leaders who design insights specifically for the woman investor. Charlene’s work has been featured in a variety of publications including the Huffington Post, Black Enterprise, and the American Institute of Certified Public Accountants. In 2019, Charlene released her book “Dividends Are a Queen’s Best Friend”, on Amazon.

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