Income vs. Wealth

This post is part of a series sponsored by InsurBanc.

Career aspirations are often guided by maximizing one’s income. Highly effective and successful employees earn an ever-increasing wage and grow their income as they continue to succeed.

But, if an employee stops working, they stop earning. If an employee changes careers or diverts their attention in the short term, their income can drastically change. Wealth, on the other hand, is generating assets that earn income over a longer period of time and not directly tied to work.

In the traditional sense, building wealth means diverting a portion of income into a 401(k) or similar retirement vehicle to accumulate assets that will earn income and hopefully compound those earnings over time.

For independent insurance agents, the highest and best choice to build wealth is to invest in the firm. Buying an agency, purchasing a book, or becoming an equity partner in an agency has proven to be the largest wealth generator that I’ve seen in my 25 years in banking.

Insurance agencies continue to be strong, consistent generators of repeatable cash flows with minimal additional capital investments to grow the business. We only need to look at the pace and volume of private equity to confirm that agencies are strong investments.

Producers who recognize the value of ownership and seek opportunities to purchase, buy in, invest or partner in an agency, will transition their personal finances from income generation to wealth, to generating wealth that can transcend generations.

Monetizing ownership in an agency at the end of a career will separate those who stayed in the traditional lane of income and retirement savings, and those who took the leap into the realm of agency ownership.

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