Rich Or Wealthy?

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“If you don’t find a way to make money while you sleep, you will work until you die.” Warren Buffett

The terms “rich” and “wealthy” are usually used interchangeably. According to Robert Kiyosaki, “there is a difference between the two: The rich have lots of money, but the wealthy don’t worry about money.”

If you stopped working today, how long would you be able to sustain your current lifestyle? The easy way to calculate this is to determine what your total monthly expenses are. Then calculate how much money and assets you currently have. Finally divide your total amount of money by your total expenses to get your wealth number in months.

This equation will tell you with cold clarity, how many months you can survive without a salary. This is a good place to pause and ask yourself what an “asset” is. The answer is quite simple;

  • Asset – what puts money in your pocket
  • Liability – what takes money out of your pocket

I’m sure you have listed your home, cars, the plot in Corner Baridi, your Rolex watch and expensive suits, dresses, or shoes. But do these put money in your pocket, or do they take it away?

Financial Independence is having sufficient monthly passive cashflows to finance your needs, wants, desires, and eventually, your purpose.

Let’s try the equation again (this time for a wealthy person).

Now because the income from assets is more than expenses and comes in every month, you can ideally live forever without ever needing to work for money. This is wealth! This is financial independence!

When you focus on investing for cash flow, you are focused on building your wealth, and creating continuous passive income that earns you money (while still getting the capital gains on your asset) without depleting or selling the original asset.

Here’s to your wealth!

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