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For most of us, our income is our measure of wealth. Each salary increase is another notch up in our feeling of wealth – and our confidence that we’re getting ahead.

Income is important. It is what affords us our lifestyle essentials as well as access to the things we love – good food, good wine, time with family, maybe overseas travel.

Yet, what really matters is wealth.

We only need to look at the recent economic crisis to see that it’s not just how much you earn that matters. Lose your earnings – you could lose your lifestyle.

What if you couldn’t earn money at your current rate – do you have wealth to fall back on? How long before you faced economic distress.

This is why wealth is a key measure of our financial wellbeing.

Put simply, while income is the money you receive as salary or such things as interest on savings and dividends from investments, your wealth is the total value of your assets (your cash, home, shares, super) minus your debts (credit cards, HECS, home mortgage, investment loans).

According to Mariko Chang, author and former Associate Professor of Sociology at Harvard University, “wealth is s superior indicator of financial status”[i].

Wealth, Chang argues, has distinct benefits that income does not. First, wealth gives you a financial buffer in the event of loss of income or unexpected expenses. Second, it can be passed from generation to generation. You can’t transfer your salary income – you can gift your child an asset – and with that a valuable head start. And finally, wealth gives you choices about work. Imagine doing something you love, without care for the pay. Imagine not working at all.

Yet, not surprisingly, women have less wealth than men.

Did you know that women have only 59% of the average wealth of men?[ii] For every dollar of men’s assets, women own just 59 cents.

Which creates for women greater financial risk.

To build wealth, you need a financial game plan

To build wealth, to be financially secure, to afford what you want in life, you need a game plan. Hoping it will all work out is not a strategy for success.

Most people – less than 20% – have a financial game plan.

Many feel their needs are not complex enough or their assets too low, for a plan to be worthwhile. Yet, the value of a financial game plan is not about complexity or asset values. It’s about establishing clear goals, then determining financial and tax strategies that give you the greatest chance of achieving them.

Wealth starts with income. Sustainable wealth and wellbeing requires a game plan.

[i] Chang, Mariko: “Shortchanged: Why Women Have Less Wealth and What Can Be Done About It” (2010)

[ii] NATSEM research cited in Stilwell and Primrose: “The Distribution of Wealth in Australia” (2009)

Kate McCallum is partner of Multiforte Financial Services, a boutique, independently-owned wealth management firm. Kate specialises in helping senior executives and professionals to navigate the complexities that come with creating and managing their wealth. Prior to founding Multiforte, Kate held executive roles in wealth management at BT Financial Group, Westpac and CBA.Kate holds a Master of Commerce, a Bachelor of Arts (Hons), a Graduate Diploma in Applied Finance & Investment, and a Graduate Diploma in Advanced Financial Planning. She is a Board member of the Australian School of Business Alumni Advisory Board, and a Committee member of Women in Banking & Finance. Kate is a regular contributor to the media including the Australian Financial Review.