Many years ago, a friend of mine asked, “What’s your definition of wealth?”
“The word wealth has countless definitions. I use the definition that was introduced to me years ago. It comes from a brilliant inventor, philosopher, and humanitarian named R. Buckminster Fuller. His definition goes like this: “Wealth is a person’s ability to survive X number of days forward.”
In financial terms, this translates to the question, “How many days could you survive if you stopped working today? How long could you survive on the amount of money you have?”
This is a sobering question for most people to ask because most people don’t have enough savings and assets to survive for more than a few months.
Truly wealthy people, however, those who are financially free, have assets that provide cash flow (passive income) month in and month out that cover at their living expenses and often much, much more.
Those who are financially free never have to work a day again in their lives…if they so choose. Their assets provide enough cash flow income to cover their expenses.
The question is, “How do you get there?”
When we were young, Robert and I committed to meeting with our bookkeeper twice a month. We listed all our expenses (our real ones, not our pie-in-the-sky ones), and the amount of money we were bringing in from our various jobs and from our investments.
At the time, our monthly living expenses equaled around $3,000 per month. Working with our bookkeeper, we set a goal to acquire enough assets to cover our living expenses through cash flow.
Pay yourself first
This meant that we had to pay ourselves first. We made investing in assets an expense in our budget. It wasn’t easy. There were many times that we had to put off other bills and face creditors to achieve our goal of investing.
But over time, we acquired enough assets to cover our expenses, and then some. After almost a decade, we had $10,000 in cash flow coming in and only $3,000 in expenses. We weren’t rich by most standards, but we were wealthy because we were financially free.
Wealth leads to more wealth
Robert and I were never content to “retire” and simply sit around twiddling our thumbs. It gets boring fast! The beauty of attaining financial freedom is that it freed us up to pursue our passions, increase our financial education, and also increase our investments. The hardest part was getting to that point.
So the question today is, “What will it take for you to become wealthy?”