This book focuses on two very common and unfortunate aspects of contemporary life: feeling financially constrained and feeling that life is constrained because of finances. It seems that America, the richest country in history, has many of its individuals and families struggling to realize the kind of financial independence that they (we) can achieve. Without the too-common reliance on being rescued by the financial markets, or being rescued by a better job (with lots of “stay positive, keep grinding” advice that flies in the face of the political, social, and economic forces that seem to be working against us), I use this book to promote several very different and much more potent ideas that can help the financially constrained become financially independent.
Financial management matters. There are people with high incomes who are not financially solvent, and there are people with low incomes who are financially secure. The difference is that some individuals are good at managing money. Here the author shares some important points that financially successful people know. They know not to spend money they do not have; they know not to invest money they cannot afford to lose; and they know to have good insurance and a good attorney in place to provide security against financial disasters.
Obstacles to Amassing Wealth
Societal indoctrination is a huge barrier to building wealth. It often leads to the belief that only the lucky or the dishonest make it. This book is intended to debunk that notion and to provide not just a path but also workable guidelines for anyone to follow toward achieving financial growth.
Determining True Wealth
Many people think of wealth as making six figures a year or more, but that alone isn’t what makes someone financially healthy. In fact, the IRS says:
– Earning $32,000 puts you in the top half of all American earners.
– Just over $66,000 a year puts you in the top quarter.
– To break into the top 10%, though, you have to bring home at least $113,000.
– Yet, even as several million households make these sorts of incomes, a good many of them have almost no assets to show for it and a net worth close to zero.
Grasping the Wealth Quotient
What is wealth? It is having enough passive income to live without a job. Sources of passive income can include the following: rental income, dividends, or interest from investments. How do we calculate our wealth quotient? We take our passive income, divide it by our total living expenses, and see what number we get. A number 1 or higher indicates you are living in a state of financial independence. Some examples are given to show the relationship between various income levels and expenses.
Creating Passive Income
Establishing passive income might be easier than it sounds. It’s an ongoing income you don’t have to work for. It comes in ways such as these:
– Earning interest on your savings.
– Investing in dividend-paying stocks.
– Penning books or creating other intellectual properties.
– Owning rental real estate.
As your income base grows and your investments compound, the potential for more passive and portfolio income also grows, allowing sustainable risk-taking in your investment decisions.
The book motivates people to build passive income and reach a wealth quotient of 1 or more, so they can enjoy freedom from their jobs and live life as they choose.
