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Are You Wealthy Yet?
By: Al Walker
Here's a real simple way to become wealthy.
Marty and his wife live at home with their 2 children. They own a 3 bedroom
house in a middle class neighborhood and try to live within their means. Marty
works full time in the Printing Industry, while his wife is in charge of the
home and looking after the children.
They've accumulated some credit card debt and have 2 years left on a car loan.
They try to stay out of debt as much as possible and together they've managed to
contribute a total of $32,000 to their own Retirement Fund. It is kept in term
deposits receiving 5% interest annually.
Two years prior, the couple bought an older house that they fixed-up and rent
out for $850 a month. After paying the mortgage and taxes $300 is left over each
month. This goes into their savings account each month.
At Christmas, the family bought themselves a new computer and decided to start a
home-based business. Things started out fairly slowly but after 8 months they
were receiving a steady check of $400 a month which also goes into their savings
account. This part-time business will continue to grow with the effort they
dedicate to it.
This business also offers them some very lucrative tax savings. By taking
advantage of these Tax Strategies they are able to save an additional $300 a
month on tax that was normally deducted from Marty's paycheck at work. This
monthly income is also added to the couple's savings.
Marty has just begun writing an E-book about his "production expertise" at work.
His plan is to market this book on the internet for profit
Every Sunday the couple takes a drive to stay familiar with the Real Estate
market in their area. They're looking for another property, a "handyman's
special" to fix-up and rent out. They have saved enough for a down payment and
their credit with the bank is well established.
The family's total monthly expenses are $2000. Now, here's the question:
Does Marty's family have Wealth yet?
To answer this question properly you first have to understand exactly what
"wealth" means.You achieve wealth when: *Your Passive Income is the same or
greater than your Expenses.* So what does this mean?
First, what is Passive Income?
Passive Income is money that you are paid over and over again for work that you
only do once. (This excludes using a gun or finding cash on the street) Some
examples of this would be royalties for writing a book or a song, commissions
that you receive for sales that others make and interest from bank savings or
dividends on stocks/options that you own.
Second, what Expenses are we talking about? This one's a little easier to
understand. Expenses are the total amount it takes to run your household and
your life. This includes, rent, mortgage payments, car insurance, food, credit
card and loan payments, etc…
Let's look at Marty's family a little closer… Does Marty have any Passive
Income? Yes he does. Marty's salary is not considered Passive Income. That's
because he has to work 40 hours a week just to get the basic amount. If Marty
doesn't go to work then he doesn't get paid. His overtime also doesn't count as
Passive Income.
The interest from their Retirement Fund does though. It's paid to him month
after month as long as it's left in that account. So, $32,000 at 5% is $1600 a
year. Divided by 12 months equals $133 a month in interest. Ok…..what else?
After the mortgage and expenses are paid with the rent money they receive on
their rental property they are left with $300 every month. This is Passive
Income. Just as long as the tenant stays and pays his monthly rent.
How bout that $400 from the home-based business and the Tax savings. Is this
Passive Income? Well, Marty's wife made sure that she chose a company where she
could sign new business accounts and get paid commissions on those accounts over
and over again. They've made a 5 year commitment to build this business
part-time. So yes, both the $400 and the $300 in Tax Savings would apply as
Passive Income. Let's add up Marty's total Passive Income.
Interest $166.00 Rental Income $300.00 Home Based Business$400.00 Tax Savings
$300.00 Total $1166.00
Not including Marty's salary from work, his family's Passive Income is $1166.00.
Not bad. Every month this amount flows into the family's bank account,
regardless of anything else they do.
We said that Marty's monthly expenses total $2000.00 a month. And we also said…
You have Wealth when: *Your Passive Income is the same or greater than your
Expenses.*
$2000 Expenses subtract $1166 Passive Income = $834 monthly balance needed to
have Wealth.
Marty's Expenses are still more than their Passive Income so they're not wealthy
just yet. But they're well over half-way there. With this kind of knowledge a
family can know exactly where to focus their financial attention.
Maybe when Marty writes that ebook he could get some sales and royalties from
it. Also the new Real Estate and more work on their Home-based business would
certainly help them to attain more Passive Income. Once Marty's Passive Income
is more than the family's Expenses then Marty could start to have much more
freedom. He may even choose to quit his job and continue developing his Passive
Income streams.
Take a look at your own finances. What are your monthly expenses? Do you have
more Passive Income than your Expenses? If you do Congratulations. You're
Wealthy!!! If you don't. It's time to get started and start adding Passive
Income from other areas as soon as possible.
When you truly understand this principle, you'll be well on your way to becoming
wealthy
About the Author:
Al Walker, makes it easy to launch a successful online business and rapidly build your wealth to a six-figure income. Learn the 5 essential keys to online success. To receive your free 4-part mini-course visit: http://www.businessprogramreviews.com |
