We discussed the differences between income and wealth. In what ways might the lives of people...

We discussed the differences between income and wealth. In what ways might the lives of people who have income but little or no wealth be different from those who have both income and wealth?

Expert Solution

INCOME-income is that monetary term for which an individual work.it is a periodic payment which is earned by any individual after discharging his/her part of obligation.

WEALTH-wealth is a corpus of funds which a person has accumulated with his/her savings,possessed by any will or inhereted.wealth is generally a permanent nature fund which has the potential to generate a passive income for the holder.

we can classify the lifestyles of both types of persons-

People having only income-

as we know that present consumption would be depending on the present income of the person.
the person only having income as their earning would consume a large portion of their income which could have saved and invested.
if they stop working for a month or two, then they would face financial crisis because they earn money as long as they render their services.

People having income as well as Wealth-

people can invest their wealth as per their risk capacity such as - creating Fixed deposit, investing in equities, bonds, real estate and then it would be generating passive income.
the person can spend the passive amount on consumption and can save their earnings and in long term their corpus would increase with the concept of compounding.
in case if they are not able to work for one or two months then their passive income would take care of their expenditure and it would prevent them to face any financial crisis.

the above mentioned points differntiates the lifestyples of people with and without wealth.

Rahul Sunny answered 1 year ago

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