As I wrote in previous comments on the creation of wealth, become financially free is when passive income (income from property income business residual or operated for hire, for example) exceed your monthly expenses. For this to happen, you need to know exactly how to create passive income each month and the amount of your monthly expenses. This involves tracking your income and expenses, most people simply do not. (How many people do you know you just use your bank account as an indicator of how they are?)
Another discipline of creating wealth, but most people know that not only is pay yourself first and consistently each month (or every paycheck, etc.). Everyone knows that you should stop and take in a 10% of their income each month and yet so simple as a concept that is, almost nobody does. Treat yourself and take the book “The Richest Man in Babylon” now – that will change your life if you apply the principles in this book alone. Simple, but very deep. Once again, the importance of financial education.
In addition, some expenses may be deducted from your taxable income, reducing the amount you pay taxes, therefore increasing the amount of money you have to reinvest in your business residual income or other assets, both in increasing their revenue liabilities allows much closer to the creation of wealth. That tax planning – how to spend money wisely in the right areas – can help you reach your goal of financial independence much faster (as the income of a residual income business, for example, tax benefits for those earning income as the only employees – see my article on “wealth creation – the type of income you make can cost you The Most” for more information).
As I’m sure you’ve seen or heard before, once the money has the power to make rich and poor. Money, after all, is just an idea, a tool. More money simply improve your current financial situation, good or bad. Increase your financial knowledge will help you develop financial discipline so you can increase your financial intelligence.
More money is not the solution to bad money habits. Financial education – learning the difference between assets and liabilities, the good debt and bad debt, etc. – is the remedy that will help you learn and understand the habits of good money so you better use the money to tool keep more of your money that will lead to the creation of wealth.
You can find a variety of financial education resources, books, audios, games, etc in my wealth of resources section on the Create tab on the top of my hansschoff.com blog. I also encourage you to download the “Checklist to create wealth” my freedom by filling out the form at the top right of this page.