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Reflect on Learning: Do you understand the differences between income and wealth? What are some examples of income? What are examples of wealth? Imagine you earn an Upper Class income of $200,000 per year. You rent a killer apartment and stock the closet full of designer clothes. You take pricey vacations, buy tech gadgets, and eat out every night. At the end of the year, what is the value of the things you actually own? Have you built your net worth? Even though you have a high income, you have built almost no wealth. Wealth building is all about systematically transforming part of your income into the ownership of things that hold or increase their value over time. That requires money management skills.
THE BIG PICTURE
Being financially literate means understanding how money works both globally and on a personal, money management level. Income and wealth are not the same things. Income is earned; wealth is built from income. Both activities require quite a bit of effort, strategy, skills, and discipline. There are three main classes of income that define American society: Upper, middle and lower. Each class is further divided into subclasses. There are a number of social programs to assist low income families and families living in poverty. There are many factors that influence socioeconomic status. Financial literacy is one of them. You are already engaged in the most important aspect of earning an income and building wealth: Getting an education.
PRODUCT PREVIEW
PONDER AND PREDICT As you move up into a career, you will need a place to safely and securely store the money you earn. As a result, you will develop a close personal relationship with a very old institution. Can you guess what it is? Write your predictions here. In the next chapter, find out if you're right. ______________________________________________________ ______________________________________________________
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Chapter 1 | Getting Personal: You and Your Money
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