How do people typically classify their sources of wealth according to the CCP model?

In the context of the CCP (Consumption-based Capital Asset Pricing) model, individuals typically classify their sources of wealth by considering both their current income and the assets they currently own. This approach allows individuals to have a comprehensive understanding of their financial situation, as it assesses the resources available for expenditure and investment. By taking into account current income, individuals account for ongoing earnings that can impact their spending and saving behavior. Additionally, currently owned assets contribute to an individual's net worth and can be liquidated or leveraged as needed for future financial needs or aspirations.

This dual consideration is crucial because individuals do not base their financial decisions solely on past earnings or future income projections. Relying only on past earnings would not accurately reflect their current financial capabilities, while focusing solely on future income would ignore the immediate reality of their financial resources. Thus, the integration of current income and owned assets provides a more holistic view of wealth classification according to the CCP model, forming the foundation for informed financial planning and decision-making.