Difference between Money and Income

Key Difference: Money is an intangible concept, which means it cannot be touched, it cannot be smelled; however it can be seen in terms of numbers. Money does have a few properties such as it must be a medium of exchange; a unit of account; a store of value; and, occasionally in the past, a standard of deferred payment. Income is defined as the consumption and savings opportunity that is gained following deducting all necessary expenses. The money that is saved after all the expenses have been deducted is considered as an income.

Money and income are two different words that refer to two different things. Money is considered as an intangible concept that is only visible in numbers. Income is the amount of money that an individual has managed to save following their spendings. These two are often confusing as there isn’t a proper definition available for either of the words.

Money is an intangible concept, which means it cannot be touched, it cannot be smelled; however it can be seen in terms of numbers. These days everything runs online, so if you transfer money from one account to another account, the only difference is in the numbers. You don’t actually see the tangible money or you cannot physically touch the money. That’s what money is! It is a concept that is used to describe a medium to exchange commodities. Originally, we used to have a barter system which would require trading one commodity for another. However, in today’s fast paced world, not everyone works or deals in commodities. Also, it would become a very time consuming job having to barter for every single thing. Hence, money makes it easier to trade one commodity against money, which can then be traded for another commodity or service.

Money does have a few properties such as it must be a medium of exchange; a unit of account; a store of value; and, occasionally in the past, a standard of deferred payment. Any kind of object that fulfills these functions can be considered as money. Although, previously gold was considered to be money as the banks would have gold reserved, based on which they would issue notes or currencies. These were basically promissory notes stating that it would pay you that amount of gold when presented with the currency. However, this has long since changed and one can no longer demand gold/silver or any such commodity upon presenting the cash. Money has now become a complete intangible concept that is represented by numbers in the system.

Income is defined as the consumption and savings opportunity that is gained following deducting all necessary expenses. The money that is saved after all the expenses have been deducted is considered as an income. The term also has other definitions including how much money is earned from the salary. According to the Principles of Economics, for household and individuals the term can also refer to “income is the sum of all the wages, salaries, profits, interests payments, rents and other forms of earnings received... in a given period of time.”

Changes in income can be contributed to factors such as education level, globalization, economic freedom, peace, purchasing power, etc. In economics, income is defined as, “the return accruing for a person, or a nation, derived from the "factors of production": rental income, wages generated by labor, the interest created by capital, and profits from entrepreneurial ventures.” Incomes can be calculated for an individual, a family, a state and a country. Incomes of individuals, family and state contribute to the income of the country.

Image Courtesy: lynntelfordsahl.com, beginnersinvest.about.com

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