Income is Not Wealth

By Penny Counts 

Regular readers of my blog would know about Srinivas, a young professional with a comfortably good-paying job who thought he had figured everything out. He considered himself wealthy—among the top 1% of India's elite in terms of wealth. He genuinely believed that a good job and a decent salary were enough for financial security. But the reality of life hit him hard when he foolishly took a home loan, car loan, consumer loan, and even a personal loan. He was bogged down with debt and a huge EMI commitment, which left him with hardly anything else to make him wealthy in the real sense. His life revolved around EMIs.

His wake-up call wasn't a slow realization; it was a sudden, jarring event. An emergency—his father's unexpected ailment—demanded immediate funds. His father relied on him completely, and he found himself staring at a gaping hole where a financial safety net should have been. Every rupee he earned was already committed, and there was nothing left to cushion this unexpected blow. It was a terrifying moment that laid bare the critical difference between having an income and actually possessing wealth. And he had to take another personal loan to tide over the crisis.

He realized that a good income doesn't automatically make you wealthy. So, what does—and what's the way out? Penny Counts (PC) helped him in managing his debt, giving him a strategy for debt elimination and bringing it down to manageable levels—not all debts, but only the unproductive, high-cost ones.

Srinivas is a sharp and intelligent person, managing a team in his professional life, and things depend on him. Why did he need professional help?

Well, we're all trained to get a good income by way of a job or business, aren't we? Study hard, get good grades, get a great job with a handsome package or start a venture, and you’re set for a good life—supposedly on the path to wealth. Are we trained in money? Srinivas learnt that income is just cash flow. Wealth is a stock—something you meticulously build and grow over time using that very cash flow. Unless you strategically deploy your earnings to work for you, to multiply and generate more income, a high income alone will never make you wealthy. This brought him to a crucial question: How does he make his money truly work for him?

This question demanded a holistic approach to money management and the skill of capital allocation for wealth creation. Like many of us, Srinivas initially thought that he could do this on his own. We assume that we "know money" because we can budget, manage expenses, and save. While that’s true to an extent, saving and actually deploying your money to create wealth is an entirely different ballgame.

And this is where financial planning becomes indispensable. Penny Counts helped him with a plan of action to build generational wealth.

From Earning to Investing

Moving from being debt-free to actively investing was a monumental shift for Srinivas. Not everyone grasps its significance early in their career. But for someone like Srinivas, who transitioned from an EMI-focused mindset to wealth creation, he realized that he had a significant advantage: the discipline he gained from paying off those EMIs. However, the world of wealth creation is complex, requiring a different skill set. He learnt that merely earning money and parking it in SIPs, FDs, or even real estate, while better than nothing or paying EMIs, isn't enough. Because not all asset classes give you the same return, and not all asset classes are required to be invested in at an early age. Therefore, to make money grow—to make us truly free and wealthy—that requires a plan.

To be continued…

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(Penny Counts is an upcoming venture dedicated to helping you achieve your financial goals through personalized financial planning, debt management, investments, and personal finance solutions. Reach out to us for assistance.)