As I’ve written in previous posts on creating wealth, becoming financially free occurs once your passive income (from a residual income business or properly managed rental income property, for example) exceeds your monthly expenses. In order for that to happen you must know exactly how much PASSIVE INCOME you’re creating each month AS WELL AS the amount of your monthly expenses. That requires tracking your income and expenses, which most people just don’t do. (How many people do you know who simply use their bank balance as an indicator for how well they’re doing?)
Another creating wealth discipline most people know about but just don’t do is paying themselves first and consistently every month (or from every pay check, etc). Everyone knows they should set aside and SAVE 10% of their income each month and yet as simple a concept as this is, hardly anyone does it. Do yourself a favor and grab the book “The Richest Man In Babylon” now – it will change your life if you apply the principles in that book alone. Simple yet very profound. Again, the importance of financial education.
Also, certain expenses can be deducted against your taxable income, lowering the amount you pay in taxes thereby increasing the amount of money you have to reinvest into your residual income business or other asset to again increase your passive income to get you that much closer to creating wealth. Such tax planning – like spending money wisely in the right areas – can help you reach your goal of financial independence that much faster (as long as earning income from a residual income business for example; no tax planning advantages for those only earning income as an employee – see my article on “Creating Wealth – The Type Of Income You’re Making May Be Costing You The Most” for more info).
As I’m sure you’ve seen or heard before, money has both the power to make you rich as well as poor. Money after all 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 which will help you learn and understand proper money habits so you can better use the tool of money to keep more of your money which will allow you to move towards creating wealth.