As I’ve written in previous wealth-building posts, financial freedom occurs once your passive income (for example, from a residual income business or a properly managed rental income property) exceeds your monthly expenses. For that to happen, you need to know exactly how much PASSIVE INCOME you are creating each month AS WELL AS the amount of your monthly expenses. That requires keeping track of your income and expenses, something most people simply don’t do. (How many people do you know who simply use their bank balance as an indicator of how well they are doing?)
Another wealth building discipline that most people know about, but simply don’t practice, is paying themselves first and consistently every month (or out of every paycheck, etc.). Everyone knows that you should set aside and SAVE 10% of your income every month, and yet, as simple as this concept is, almost no one does it. Do yourself a favor and pick up the book “The Richest Man in Babylon” now – it will change your life if you apply the principles of that book alone. Simple but very deep. Again, the importance of financial education.
In addition, certain expenses can be deducted from your taxable income, which reduces the amount you pay in taxes and therefore increases the amount of money you have to reinvest in your business from residual income or another asset to grow again. your passive income and get you that much closer to building wealth. Such tax planning, such as spending money wisely in the right areas, can help you reach your goal of financial independence much faster (as long as you earn income from a residual income business, for example; there are no tax planning advantages for those who only earn income as an employee: see my article on “Building Wealth: The Type of Income You’re Generating May Cost You the Most” for more information).
As I’m sure you’ve seen or heard before, money has both the power to make you rich and to make you poor. After all, money is just an idea, a tool. More money will simply amplify your current financial situation, good or bad. Increasing your financial education 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, good debt and bad debt, etc.) is the remedy that will help you learn and understand proper money habits so that you can better use the tool of money to keep more of your money. money, which will enable you to move towards wealth creation.