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What distinguishes between living on principal and living on interest?
Wiki User
∙ 12y ago
If you have something of value such as an amount of money, that is the principle. If you take from that amount to live on, you are living on the principle. The basic item you own is decreasing in value. You may be living well now. If you continue using up the item, you won't be able to use it in the future. You will need other sources of money in the future.
Some items gain in value, such as a bank savings account that provides interest. If you draw off the interest, the basic amount in the account stays the same. But you are living on the interest. Sometimes people say that you live off the interest. However you say it, the basic value of the item may stay the same. What you own may even increase if you take out only some but not all of the interest. So you may be living on less money now. In the future, you will still have the item.
Wiki User
∙ 12y ago
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