Unlike income that is generated over a certain period, wealth is the accumulation of assets a person has at any given time. Typically, anything that you can sell or liquidate (turn into cash) is part of your wealth. Let’s look at a few common sources of wealth.
Cash and Savings
Whether it is in your wallet, piggybank or lying around your house, any cash you own is considered part of your wealth. Likewise, any money you have in a savings or checking account is also counted as wealth.
The market value of all the property you own is considered part of your wealth. This value changes as the economy changes. It is also hard to pinpoint exactly how much your properties are worth unless you liquidate or sell them. But you can determine their value by comparing your properties to similar properties that are sold recently in the market.
Inheritance and Gifts
All the money that you received through an inheritance counts toward your wealth. If a family member, friend or acquaintance recently departed and gave you a part of their wealth, you can count that money or property as part of your wealth.
People who inherit a lot of wealth that has been passed down several times have what is called “generational wealth.” This is the accumulation of the wealth of one or more past generation that is passed down to the next generation.
Even items that are not money are considered toward your wealth, as long as they have monetary value. For example, an expensive diamond that you can sell in the future is part of your wealth.
While the earnings you have through dividends or through the sale of your investments are part of your income, the capital itself is part of your wealth. This might seem confusing, but think of it like an investment rental property. The property itself has a certain value that fluctuates and is counted toward your wealth. However, any rent you receive while you own that property is counted as income.