Often confused between salary and income? Be careful, this can mess up your financial plans! Both are indeed money coming in, but they have very different roles. Distinguishing between the two is the key to controlling your money, not the other way around.
1. Salary = Stable and Predictable Money
Think of your salary as the foundation of your finances, a fixed income from your main job. Salaries are stable, paid regularly (usually monthly), and come with an official pay slip. Salaries are typically used for all routine and mandatory expenses (mortgage payments, bills, basic necessities), which you should use as a benchmark when creating a budget.
2. Income = Additional Money that Fluctuates
Income is all the money that goes into your account, including your salary and other sources. Generally, income is the total amount of money coming in, which can be from your salary, bonuses, freelance work, commissions, cashback, or sales. Income is unpredictable (fluctuates); it can be large this month and small next month.
The main function of income is to allocate funds for major financial goals such as investments, emergency funds, or purchasing dream items. In essence, income outside of your salary is an accelerator that helps you get rich quickly, but it should not be relied upon to cover your monthly expenses.
Understand the Flow to Keep Your Finances Secure
Never include additional income in your regular expenses. If you only rely on your salary for living expenses and use additional income for savings and investments, your bills will always be paid on time, and your savings will grow quickly without sacrificing your daily needs.
Let's start now by separating your records and expenses. Control your money; don't let money control you!
Source: Skorlife
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