It’s easy to think that once you become a millionaire, you’re set. All your financial woes go away, and you have “made it.” However, this kind of mindset is dangerous because real wealth is not measured by how much you have, but rather how long you can last on what you have.
Are you looking at your saved money as real wealth?
When people think about “lasting on the money I have,” they immediately want to save more and put more money in the bank. Over years of traditional thinking, most employees would think this way. However, sooner or later, the inevitable will happen. The money you have in the bank will run out. To the financially educated, they are looking at 1) their expenses and 2)how their investments can cover those expenses. Unlike with employee working, you are removed from the equation, and your income derives from multiple streams of income. That stream runs indefinitely! That is the measure of real wealth.
To create wealth, you must know where you are now. If you stopped working today, how long would your money last?
- Look at your income and expenses – over the past 12 months, pull out all your pay stubs, bank statements, receipts, bills and credit card statements. Determine exactly how much money you have made and how much money you are spending each month on costs. This is your income statement.
- Look at what you own and how much you owe on it – List items like properties and cars. Determine their real worth today. These are your assets. Now, determine what you owe on these assets. These are liabilities. Thus, your asset worth and the liabilities against the assets create your balance sheet.
- Determine how long your money would last –
Income statement = (total income/total expenses) /12
If you get a negative number, it states that if you were to quit working today, you would need to use the value of your assets to survive.
To determine how many months you could survive = asset balance sheet/income statement.
Increase your wealth faster with a coach
All these calculations are to give you a ‘true view’ of your wealth. It gives you a benchmark and from which to create other streams of income to cover your monthly expenses. Going it alone is not easy. Therefore, when you add a real estate expert coach, you can accelerate your progress. Contact me today and let’s determine if 1:1 coaching is right for you.