The Difference Between Income and Wealth

Income costs you energy. An asset gives you energy back.

I once sat with someone earning 200,000 euros per year. He was convinced he was rich. Twelve months without work and everything vanishes. This isn't wealth. It's a business he happens to own.

Florian is something entirely different. The houses produce. The tenants pay the mortgage, maintenance, everything. Drago runs the daily operations. Money flows in while I do something else. Or nothing at all. That's the difference between income and wealth.

Wealth isn't what you earn. It's what you own that other people want to rent.

This sounds simple but it's revolutionary, especially in the Netherlands. We grow up believing work is good. Hard work is good. More hours are good. But all that energy goes to someone else. You invest in your employer and his company value rises. His stock appreciates. His wealth grows. Yours just grows a to-do list.

Assets can be anything. A rented property. Stocks paying dividends. A crowdfunding real estate deal with monthly distributions. A network that refers clients. A book generating royalties. A digital product you build once and sell a thousand times.

What they have in common is they work while you sleep. They require initial energy but no ongoing toil. That's the mathematical boundary between mediocrity and wealth.

I know people trying to build wealth through savings accounts. They stash money at zero-point-something percent interest. That's not wealth building. That's waiting for inflation to erase it. Wealth building means deploying money into something that returns more than it costs.

The question you need to ask yourself isn't: do I earn enough? The question is: what do I own that produces money while I'm not there?

Until you answer that, you're not building wealth. You're generating income. And income can be taken from you in a week.

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Sources: Kiyosaki, Robert T., Rich Dad Poor Dad (Warner Business Books, 1997)