Having a high net income provides many benefits and advantages. Net income refers to the amount of money you earn after accounting for taxes and other deductions. The higher your net income, the more disposable income you have available to save, invest, and spend on necessities and luxuries.
More Money to Save and Invest
A high net income allows you to save and invest more money. Saving and investing provides financial security and prepares you for the future. The more you can set aside, the faster your savings can grow through compound interest. This gives you a larger nest egg for retirement, college tuition, a down payment on a house, starting a business, and other big expenses. With more invested, you also have the potential for higher investment earnings.
| Annual Net Income | Amount Invested Monthly | Balance after 30 Years (7% Return) |
|---|---|---|
| $50,000 | $250 | $207,000 |
| $75,000 | $500 | $414,000 |
| $100,000 | $1,000 | $828,000 |
As the table shows, the more you can invest out of a higher net income, the larger your investment portfolio grows over time thanks to compounding returns.
Increased Financial Security
A higher net income provides increased financial security and reduces stress. You have more room in your budget to comfortably afford necessities like housing, transportation, food, utilities, and healthcare. You can also better withstand unexpected expenses like car repairs, medical bills, home repairs, and job loss.
With extra income, you can build up an emergency fund with 3-6 months of living expenses. This fund prevents you from going into debt when surprise expenses come up.
In addition, you can pay for higher levels of insurance, such as disability insurance and life insurance, that provide protection in case you lose your income.
More Disposable Income
Disposable income is the money you have left over after paying for necessities. A higher net income means more disposable income to use for vacations, dining out, entertainment, hobbies, and other lifestyle luxuries. With more disposable income, you can enjoy your life more both in the present and when you retire.
Disposable income also allows you to upgrade your lifestyle or living situation. You may be able to afford a nicer house or apartment, buy a vacation home, drive a better car, purchase the latest technology, eat at nicer restaurants, go on more elaborate vacations, and pay for leisure activities like golf, boating, or theater tickets.
Comparison in Disposable Income
| Annual Net Income | Monthly Expenses | Disposable Income Per Month |
|---|---|---|
| $50,000 | $3,000 | $1,000 |
| $75,000 | $3,500 | $2,750 |
| $100,000 | $4,000 | $5,000 |
With $50,000 in net income, there is only $1,000 left per month after basic expenses. But with $100,000 in income, there is $5,000 in disposable income to enjoy each month.
Ability to Donate More
A high net income allows you to share your financial blessings with others through charitable donations. You can donate more to causes and organizations you care about, such as:
- Places of worship
- Non-profit organizations
- Political campaigns
- Social advocacy groups
- Disaster relief funds
- Hospital or medical research programs
- Youth programs
- Animal shelters
- Arts organizations
Donating provides social benefits by supporting services and institutions to help others. It also can provide personal fulfillment, satisfaction, and tax benefits.
More Options to Change Jobs or Careers
A high net income gives you more flexibility to change jobs or careers. You may have enough savings and disposable income to take time off between jobs, go back to school, or start your own business. The ability to take career risks allows you to pursue more meaningful or enjoyable work.
With a larger financial cushion, you can afford to take a lower paying job that you are passionate about or offers better work-life balance. Many people dream of starting a small business or becoming an entrepreneur but don’t have enough disposable income to get it off the ground while still meeting their regular living expenses.
Ability to Support Family
A higher net income allows you to better provide for your family. You can afford a more spacious home in a good school district to raise children. With two incomes, you and a spouse or partner can live comfortably while only needing part-time childcare.
In addition, you can save for your children’s college education and help them graduate debt-free. Paying for family vacations, cars, allowances, and extracurricular activities for kids also becomes more affordable.
Later in life, a higher net income allows you to provide financial support to elderly parents or relatives needing assisted living services. It also gives you resources to potentially hire caretakers or nursing assistance.
Higher Net Worth
Net worth is a measure of your overall financial health calculated by assets minus liabilities. The higher your income, the faster you can grow your net worth over time through increased savings and investment balances. Having a high net worth provides a sense of financial accomplishment and gives you access to more lending options.
In addition, a higher net worth allows you to leave a larger inheritance to your loved ones and make significant philanthropic gifts either now or as part of your estate planning.
Better Access to Credit
Lenders look at your income level and debt-to-income ratio when you apply for financing. A higher net income means you can qualify for larger loans with better terms, such as lower interest rates. Good credit helps you attain financing to buy a house, invest in real estate, start or expand a business, and make other major purchases.
In addition, a higher net income allows you to more easily qualify for premium credit cards and higher credit limits. Good access to credit helps cover unexpected expenses, consolidate debt at lower interest rates, and earn valuable rewards.
Decreased Financial Stress
Money is frequently cited as a top cause of stress. The more disposable income you have, the less financial worries weigh on your mind. You experience less stress and anxiety when you know you can pay all your bills and afford emergencies that pop up.
A survey by the American Psychological Association found that 72% of adults feel stressed about money at least some of the time. Over 22% experience extreme stress over their finances.
With a higher net income, you likely feel more confident in your financial future. You don’t have to constantly stress about every purchase decision or sacrifice things you really want. Financial peace of mind allows you to focus your energy on family, relationships, career, and passions instead.
Symptoms of Financial Stress
- Anxiety, irritability, and depression
- Trouble sleeping
- Headaches or stomachaches
- Less productivity at work
- Relationship conflicts over money
- Difficulty concentrating
- Feeling isolated from friends and family
A higher net income can alleviate many of these physical and psychological symptoms associated with money-related stress.
Allows Pursuit of Passions and Dreams
Money provides the freedom to pursue your true passions and dreams. Without a high enough income, you may be stuck in a job you dislike just to pay the bills. Or you may not have enough time outside of work for activities you enjoy.
With a higher disposable income, you can cut back your work hours to spend more time with family, travel the world, dedicate time to a beloved hobby, or go back to school to change careers. You also have the ability to start your own business more easily.
The flexibility and comfort provided by a high net income allows you to live life on your own terms. You have the freedom to pursue what really makes you happy instead of just going through the motions of everyday work.
Allows More Spontaneity
Having spare income available allows you to be more spontaneous in life. You can book last-minute trips, buy something just because it brings you joy, try new restaurants or activities on a whim, and generally experience life more freely.
Without excess income, all your money is budgeted and accounted for each month. You miss out on opportunities for adventure, fun, and new life experiences when you have to play it safe financially.
Greater Work-Life Balance
A high income allows you to achieve greater overall work-life balance. You may be able to work less and devote more time to personal health, relationships, and leisure. With more disposable income, you also likely have the ability to outsource disliked tasks like house cleaning and yardwork to have more free time.
When you aren’t living paycheck to paycheck, you can avoid burnout and chronic stress from overwork. Enjoying your life outside of work makes you happier, healthier, and even more productive during working hours. With good work-life balance, you have the physical and mental energy to perform at your best while on the job.
Enhanced Social Status and Opportunities
Whether we like it or not, money is associated with social status in our society. A higher income provides access to elite social circles and the powerful connections that come with them. You may have opportunities to network with other successful entrepreneurs, professionals, political leaders, and financiers.
In addition, a high net income allows you to become involved in prestigious clubs, organizations, or causes that interest you. People naturally respect and admire others who are financially successful. The connections and respect gained can lead to both personal and professional opportunities down the road.
Achievement of the “American Dream”
America has long promoted the “American Dream” – the idea that anyone can be financially successful through hard work and perseverance. While a high income doesn’t guarantee happiness or fulfillment, it is often associated with freedom, security, and realizing your full potential.
Having a high net worth and disposable income allows you to feel like you have “made it” according to society’s standards. It’s an acknowledgment that your talents and efforts have paid off. Achieving a certain level of financial success can be extremely rewarding and boost self-esteem.
Of course, money doesn’t buy everything. But having your finances in order gives peace of mind and opens doors that allow pursuing deeper fulfillment through family, relationships, hobbies, and causes you believe in.
Conclusion
There are clearly many advantages to having a high net income. It provides security, flexibility, opportunities, and more control over your lifestyle. Additional disposable income allows you to live life more freely and fully. While money alone doesn’t guarantee happiness, having your financial needs covered gives peace of mind and removes obstacles to pursuing your passions.