What They Don't Teach You In School About Wealth

Most people want to be successful in life. And for many people, that means they want to get rich and experience financial freedom. But when it comes to knowing how to accomplish that, most people are actually at a loss as to how to do it, or what it really even means.

All our lives, we are essentially taught that to make money, you have to get a job, pay your bills, stay out of debt and save money. Most people think that by just doing this they are on the path to financial security. But that's not exactly how it works...

People aren't really taught how to manage money while they are in school or when they are young and just beginning to work. By the time they start learning when they're older, they're already working and it's often too late. When it comes to the fundamentals of money management in the real world, most schools offer no formal curriculum or educational programs for it. This creates a challenge for many of us.

WHAT IS THE DIFFERENCE BETWEEN BEING RICH AND BEING WEALTHY?

There is a big distinction between being rich and being wealthy. Being rich means, you have a substantial amount of money in the bank, perhaps from what you earned, and/or what you have inherited, (property, money, etc.). But without a strategy to keep it, or plan of how to manage it and make it grow, even rich people can lose their money.

Wealth is about having your money work for you. It's about generating cashflow from what you have, so you can eventually replace your income with 'passive' income, or cashflow. Unless your passive income exceeds your active income, you will be working for the rest of your life or until you retire at the age of 65 to 75.

Do you now see the distinction between being "rich" and being "wealthy?" Just because someone can travel and enjoy a luxurious lifestyle, doesn't mean he or she is necessarily wealthy. To clarify this, I will explain the golden triangle of wealth theory, a triad composed of net worth, network, and self-worth. 

THE GOLDEN TRIANGLE OF WEALTH CONSISTS OF:

Your net worth; your network; and your self-worth. This incorporates the money you have and how you put it to work; who you know; and the level of self-confidence you have. Our net worth is positively impacted by our network and self-worth. For more on this topic please read my article that was shared few months ago, The Golden Triangle of Wealth.

Typically, we are trained to make money, pay our bills, then save what we can, until eventually we are financially free. Most people use ninety percent of their income to live on and pay bills, saving only about ten percent annually (the 10-90 formula) -- but that is not the path to accumulating real wealth or even a secure retirement.

Self-made and financially free individuals think differently about money:

They have a 'money mindset' and a unique approach, which I will share with you. It will change your 'money mindset' forever. It's known as the 10-10-40-40 formula.

THE 10-10-40-40 APPROACH TO CREATING WEALTH:

·         SAVE 10% (roughly six months or six to eight times your monthly salary) for an emergency fund.

·         LIVE ON 40% of your net income.

·         GIVE BACK 10% Giving back to society should be part of any good financial plan. This is the amount you will use for your charitable donations and activities, etc.

·         INVEST 40% of your income.

40% of your income should create CASH FLOW. How you invest is based on your personal circumstances and choices, but should generally include a combination of stocks, bonds, mutual funds, rental properties and other appropriate investment opportunities. This is perhaps the most critical step in the formula.

Some people say that 'Cash is King'-- but the truth is, cash has no value if it's not working for you. The real 'King" is the CASH FLOW that brings you sustainable INCOME.

It's still early in 2020-as you continue planning for the year ahead, consider shifting your 'money mindset' from the usual 10-90 to the 10-10-40-40 formula and watch your personal revenue grow. It's never too early to start planning for the rest of your life. Investing in yourself is the best way to accumulate real wealth. Make your PASSIVE INCOME cover your lifestyle expenses forever and enjoy your financial freedom.

Who are you going to share this article with? How about the 10-10-40-40 formula? I look forward to receiving your feedback.

Farshad Asl www.farshadasl.com