There are two factors to account for whether a person wealth or not: income and spending. The relationship between income and spending will determine how well you do financially and how long you would last on building wealth. The author of this blog pointed out there are four “extremes” that highlight the boundaries of good and bad money management. Income and spending can only be either “high” or “low”. Therefore, we would conclude four extremes are: income high, spending high; income low, spending low; income low, spending high; income high, spending low.

Income high and spending high seem to be ideal situation. People with high incomes and high spending are living the good life. Also, they may have a lot of potential to grow their wealth because they have high incomes. On the other hand, they spend much to live in a luxurious lifestyle. Hence they have no surplus, even they have a lot of potential, to grow their wealth.

The best of all possible scenarios is when income is high and spending is low. There people keep adding to their wealth. Their surplus is large because they make good income and keep their expense under control. Their wealth is growing continuously. Income high and spending low would help to improve your financial situation and grow your wealth subsequently.

http://www.freemoneyfinance.com/2013/10/money-101-income-and-spending-scenarios-and-the-impact-on-wealth.html

This entry was posted on Wednesday, October 2nd, 2013 at 4:29 PM and is filed under Assignment, Unit 01. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.