How To Actually Measure Wealth
Are you wealthy, or do you think you’re wealthy?
You might think if you earn a million dollars or six figures through a salary that, you are wealthy.
According to Robert T. Kiyosaki, this isn’t true wealth.
The average person would find this salary a good stinking deal.
Robert challenges you to rethink this.
And here’s why.
A person is more likely to have expenses that exceed their high salary.
Even though they’re earning a good amount of money, their expense load makes that money disappear instantly.
People habitually nullify their high salaries by spending more than their income.
Most people live above their means.
The more money they earn, the more they spend.
It’s the standard of how many live.
We earn.
We spend.
And the cycle continues.
Saving, investing, and building assets are uncommon; your home isn’t an asset until it puts money in your pockets.
The First Thing That Happens To Wages (aka Salary)
What’s the first thing that occurs when your paycheck drops into your bank account?
Taxes.
A hefty portion of your paycheck goes straight to taxes.
The more you earn, the more the government takes.
How Money Works In The Middle Class
Earn.
Pay taxes.
Spend.
How Money Works With Investors & Business Owners
Earn.
Spend.
Pay Taxes.
The middle class doesn’t get to touch their money until the government touches it first.
On top of that, a bulk (or all) of their leftover earning go to liabilities and expenses instead of building assets (e.g., investing).
Investors and business owners, on the other hand, touch their money sooner than the middle class, and the government touches their money last.
Furthermore, their business can often pay for many of their expenses.
What True Wealth Looks Like
How much money do you earn without having to lift a finger?
The answer to this question is “zero” for most because they don’t have enough stocked away in their investments to create passive income, or they don’t have any assets working around the clock.
When your passive income matches your monthly expenses, you become wealthy.
When your passive income exceeds your monthly expenses, you become a wealthy outlier.
Why is this?
If you can survive without having to work outside of your assets working for you, you have reached financial independence.
Many will never reach financial independence and will focus on working and maintaining a job throughout their lives, which is building someone else (i.e., investors and business owners) a fortune.
You can build wealth through having a job if you invest your income into assets (anything putting money IN your pockets) versus liabilities (anything taking money OUT of your pockets).
But if you invest your money into liabilities, true wealth will stay out of sight.
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.
In that sense, financial literacy is indeed important.