There are two ways that income is created, “People at Work” and “Money at Work”. The key word in both of those is work. Don’t believe get rich quick schemes; there is always work that needs to be done to achieve things that are worthwhile and lasting.

People at Work is pretty straightforward. Are you employed? Then you are the part of the “People at Work” bucket. Whether you are self-employed, an owner or a W-2 employee, your income is a key component of your Net Worth and whether it is growing or decreasing. If you want to see net worth increase, either you make more money or spend less.

Perhaps less intuitive is the Money at Work component of your income. Money at Work are your retirement accounts and other investment assets. Do you put money into a 401k? Do you save in a Roth IRA? Or invest with a self-directed account on the side? All of these make up Money at Work. Over time, the market has consistently rewarded investors by moving in an upward trajectory. It is not a guarantee to move up at all times, but when your time periods are greater than 10 years, the market* rarely delivers a negative return. Not only would a portfolio invested in the market grow, but the assets that you are invested in often are sources of income from dividends and capital gains realized.

The simple formula is People at Work + Money at Work = Gross Income. From this key element, decisions begin to flow. Charitable Giving can be done from the income received. Tax Planning, Cash Flow Management, Savings and Investment Planning, Asset Protection/Insurance and Estate Planning decisions are all heavily influenced by your income; if you don’t have a complete understanding of the people at work and money at work, it is less likely that you will be making the most-informed decisions in your best interest. Let us help you clarify your financial picture.

Money at Rest is the last building block component that makes up Total Assets. This is the money that you have parked for savings or immediate expenses. It is not growing or invested in the market (though sometimes people park this in a Money Market that gains more than a CD at the local bank) but is held to the side as an Emergency Fund. Should the money be needed, it is immediately available.

*In US dollars. 10-year rolling equity premium is computed as the 10-year annualized compound return on the Fama/French Total US Market Index minus the 10-year annualized compound return of the one-month US Treasury Bill.