The mentality of considering home as investment and seeing wage growth as a resource to buy a larger house or spend more is the foundation of today’s debt-based society. Most people move up to higher positions in their jobs over time and receive regular salary increases. However, due to the increase in expenses, many families are under greater debt day by day and face more financial uncertainties.
If you are an employee,
- You work for someone: Most wage earners enrich the boss or shareholder. Your efforts and success contribute to the success and retirement of the boss.
- You work for the state: The state gets its share before you get your salary. By working harder, you increase the amount of tax charged by the state. Most government officials work from January to May only for enriching the state.
- You work for the bank: After taxes, your biggest expense is deductions and credit card debt.
The problem with hard work is that each of these three stages gets their share thanks to your increased efforts. What needs to be learned is how to translate increased efforts directly for the benefit of you and your family.
Most people have to rely on their salary to pursue their profession and receive income-generating active funds. So how do they measure the extent of their success as their actives grow? How does one realize that he or she is rich or has wealth? In this regard, besides the definition of active and passive, the definition of wealth is also important. Let’s look at what R. Buckminster Fuller said. Although what he says seems quite complicated, it begins to make sense after reading it thoroughly:
“Wealth is a person’s ability to survive so many numbers of days forward … or if I stopped working today, how long could I survive.”
R. Buckminster Fuller
Wealth is the measure of cash flow from comparing the expenditure column to the asset column. If it sounds a bit complicated, let’s explain it with an example:
Let’s say you have $ 1000 a month of cash flow from the active column. Your monthly expense is 2000 thousand dollars. How much is your wealth?
Let’s return to Buckminster Fuller’s definition. How many more days of financial power do you have according to Fuller? Only half a month’s cash flow.
If the cash flow from your assets reaches $ 2000 a month, then you are rich.
So, you are not rich yet, but you are wealthy. Every month, you have income generated by active funds that fully cover their monthly expenses. If you want to increase your spending, you must first increase the cash from your assets to maintain this level of wealth. Remember that you are no longer dependent on your salary. You are successful in building your active columns that gives you financial independence. Even if you quit your job today, you can meet your monthly expenses with net income from your assets.
The next target will be to transfer the surplus cash flow from active funds back to the active column. The more coins enter the active column, the larger the column gets. The larger your active funds, the greater your cash flow and net income. As long as you keep your expenses less than the cash flow from your assets, you will get richer, you will have income other than resources from your physical effort.
As this reinvestment process continues, you take firm steps towards getting rich.
Few people have enough money to survive today. There are even people who do not have enough money to live for a month. Many Americans have less than $ 400 in savings. A more shocking statistic in 2016, the GOBankingRates found that 34% of Americans had no savings at all. Few people can survive for a long time without a paycheck or government aid.
Lastly, let’s keep in that in mind:
The rich buy the active funds. The poor have only expenses. The middle class buys passives that they think are active.
You may also be interested in:
- THE DIFFERENCE BETWEEN YOUR WORK AND YOUR BUSINESS
- WHY YOU NEED TO INCREASE YOUR FINANCIAL IQ
- WORK IN THE SAME FIELD BUT EARN MORE
You may want to read THE TWO MOST IMPORTANT SKILLS TO INCREASE YOUR INCOME too.
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