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Income and wealth aren

As I See It

How are Americans doing at accumulating wealth? Clearly, with the stock market setting new highs weekly and money pouring into investments from opportunities like 401K plans, we’re in pretty good shape.

Or are we?

As I plod along the interstate, I notice a plethora of expensive vehicles that literally flash by me. The manicured yards in our neighborhood are truly a sight to behold, and I enjoy them a lot. Surely with all of this obvious prosperity my neighbors are “doing alright.”

Or are they?

What is wealth? Is it making payments on lots of nice “things?” No. Wealth is owning lots of nice things. There is a difference in wealth and income. Wealth is what would be left if we paid off all debts. Income is cash flow available to support debts. See the difference?

Who cares? Everybody should.

Income requires that you keep earning it or you have none. Lose your job and suddenly you have no income. You still have all of your debts, just no income to pay the notes with. Wealth, on the other hand, does not require job security to sustain it. Wealth generates cash flow rather than consuming it.

So really, our robust economy is divided into two tiers: those who are truly wealthy and those who “appear” wealthy as long as the income keeps coming. A recent Gannett News Service report casts some light on the subject.

According to the report, one-third of Americans have no savings, no investments and are in debt. A fifth have zero assets! Ten million households don’t even have a bank account — clear indication they are living from paycheck to paycheck.

If indeed a third of Americans have no savings, no investments and are in debt, then they are living on the edge of economic disaster. They are certainly not enjoying the economic prosperity the politicians are all clamoring to claim credit for. If fact, they are one lay-off, downsizing or illness away from total economic collapse.

Radio commentator Dave Ramsey daily reminds his listeners (WFMN 97.3 in Jackson) that getting out of debt rather than debting up to the hilt is the road to wealth and prosperity. He maintains that this principle is true regardless of what economic strata one is operating in. I think he is “right as rain.”

Some of Ramsey’s tactics for accomplishing debt-free status include discarding credit cards entirely and paying off the balances in the order of smallest to largest, making extra payments on home mortgages and paying bills with cash whenever possible. He is also an enthusiastic advocate of family budgeting where all family members participate in financial decisions.

Whether we adopt Dave Ramsey’s methodology or devise our own, the basic principles of wealth accumulation are timeless and unchanging. Planning our finances with a eye to wealth building rather than trying to impress neighbors (whom we frequently don’t even like!) is the ticket to ride.

There is no excuse for the sorry state of our personal finances. The nauseating statistics on personal bankruptcies are just that, nauseating! A little planning and a little commitment to postponing gratification would pay substantial dividends in the years to come.


Whoever loves money never has money enough; whoever loves wealth is never satisfied with his income. This too is meaningless. As goods increase, so do those who consume them. And what benefit are they to the owner except to feast his eyes on them?


Joe D. Jones, CPA, is publisher of the Mississippi Business Journal. His e-mail address is cpajones@msbusiness.com.


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