The True Definition of Wealth

Before you can be truly wealthy, you must first know what wealth really means. Again, many people think that a person's wealth is defined by how much he earns, by the clothes he wears, by the house he lives in and by the way he lives. We now know that this is not at all true.


A person's wealth is actually defined by how long a period of time he/she can sustain their lifestyle if they stop working. The longer you can go on living your life without working another day, the richer you actually are. Your wealth is therefore defined by three things: 1) your monthly expenses, 2) your liquid assets and 3) your passive income.


Your liquid assets refer to how much cash or cash equivalents (like stocks, bonds & fixed deposits) you have to pay for your monthly expenses. Your passive income refers to income that you will continue to receive even after you stop working. This could include interest, dividends, royalties and profits from a business.


Let's look at an example. Steve is a director in a multi-national company and earns a $20,000 monthly salary.


He lives a lavish lifestyle that results in personal and household expenses a month of $18,000. He hasn't really saved much over the years as he has spent any surplus upgrading his house and car. His liquid assets are just under $18,000. Besides his full time job, he has no other sources of income. What is Steve's level of wealth?


Well, if he stops working today, his $18,000 will last him for just a month. So his wealth is one month's salary. As you can see, wealth is defined not by the absolute amount of dollars, but by time.


On the other hand, Susan, a marketing manager in a retail store earns a monthly salary of $5,000 a month but she is much wealthier than Steve. How is this so?


Well, over the last 20 years, Susan has diligently saved 20% of her income and invested it in the right stocks and mutual funds that have given her returns of 15% per year. (You are going to learn how to achieve this return with minimal risk in the later chapters).


Over the years, Susan's liquid assets have grown to $1.32 million (you can verify this with a financial calculator).


In addition, she has spent her free time building up a home-based business that sells unique collectibles over the Internet. Her small business earns her an additional income of $1300 a month. She may not drive a fancy car or wear a Cartier watch, but let's see what her wealth is.


If Susan were to stop working today, she would still retain the $1,300 monthly passive income that her home-based business earns her. Since her monthly expenses total $4,000 a month (80% of her income), she would have a net outflow of $3,700 a month.


With her $1.32 million in accumulated savings, she would be able to survive for 30 years! (This is assuming that she does not invest the $1.32 million she has prudently saved up!).


If Susan were to put her $1.32 million into a risk-free fixed deposit account earning interest of 4%, it would bring her an additional interest of $52,800 per annum.


This means another source of passive income that rakes in $4,400 a month. So you can see how Susan can very comfortably go on forever without working another day in her life!
Can you now see that your wealth (i.e net worth) is not determined by how much you earn, rather, it is determined by how much you save and wisely invest. Even with just a middle class income, you could become a millionaire if you have enough financial intelligence, discipline and patience.


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Utilizing Unique Abilities Creates Wealth

Everyone has unique abilities that they could use to further there financial freedom. Actually by utilizing their unique abilities they increase there ability to create wealth.

One of the hardest things people have is finding there own unique abilities. Peoples' unique abilities are difficult to pin point for three main reasons.

One: People are really good at there unique ability and so they don't recognize them as unique. They will often say to themselves, "If I can do it, everyone must be able to." In realty most people can't do it as well as they can because those people have different talents.

Two: Often what people are good at are what they have the most fun doing. In today's society, fun is not related to work. So, they don't think their hobbies are anything special, it is just a way to enjoy life. A lot of peoples' unique abilities are simply hobbies in there life.

Three: Chances are people have been doing there unique abilities automatically there whole life. This makes it difficult to see what they are good at, because it becomes normal for them. They are doing it right now and they have always done it.

The sad case is most people tap into their unique abilities a little bit, but they don't ever fully develop them. Thus they don't ever fully develop their potential.

Imagine a life where you are doing what you love to do everyday and getting paid to do it. Think of Michael Jordan. He loved basketball and it was his unique ability to play. For someone that it is not there unique ability to play basketball could probably never play as well as Jordan because they are not going to put there passion in to it.

It has been said that Bill Gates doesn't know that much about computers, but his unique abilities in business building and management made him a billionaire. 

When a people discover their unique abilities, they will excel and utilizing them in the their professions or businesses. Why? Because they will be doing what they love, so they will be passionate about it. Also they are in their element so they will naturally do it better than other people who do not have that unique ability. 

These talents are given to people from God so that people can provide value for the world around them. As they provide value for the world around them they will receive compensation for that value creation.

If people receive money for the amount of value they create, why wouldn't they want to utilize their unique abilities in creating the most amount of value possible?

Some people may be able to do similar things as other people. But no one is exactly the same. So even though there are similarities, no one will do everything exactly the same. That is what makes unique abilities so unique.

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WEALTH CREATION IS A GAME... You Must Learn How to Play It

You see, CREATING WEALTH is a game. If you learn the rules of this game, wealth will become so easy for you to create. If you do not play by the rules, you will struggle all your life financially despite working very hard.

Haven't you ever asked yourself why some people earn five times, ten times or even twenty times more than others? Is it because they are twenty times smarter? Is it because they work twenty times harder? Or are they many times luckier? The answer to all these questions is a resounding 'NO'!

I am sure you know people who seemed to be much lazier than you in school and had poorer grades but now they are so wealthy. Although their school report card used to be chockfull of 'F's, their financial report card carries straight 'A's. Why? 

The only reason is because they know how to play the game of wealth creation whereas most people have not learnt how the game is played. 

You see, none of us are ever taught how to make money, how to invest money or how to manage our wealth and yet money is the most important subject in our adult lives. Although many people say that 'money isn't everything', that's only a half -truth. 

The truth is that 'everything is money'! In order to achieve excellence in the different areas of lives like our health, relationships and family, we need to be financially secure! 

The traditional education system (thank God it's changing) never taught us how to become wealthy but instead brainwashed us into becoming poor. 

We are taught beliefs like 'study hard, get good grades and a good job and you'll be set for life!', 'investing is risky', 'don't play with stocks or you'll get burnt', 'don't be so money-faced' or 'don't be so stingy'. 

As result of all the wrong anti-wealth advice, most people work hard all their lives, going around in circles in the rat race and ending up broke and unhappy. 

However, a fortunate few eventually learn that wealth is not made by just getting a good job and working hard. It takes a different way of thinking and a totally different strategy. 

Those that learn this lesson get out of the rat race and onto the path of financial abundance and freedom. 

Some people take ten years to figure this out, some take thirty years and some never figure it out until it is too late. Don't make the same mistake!