BEING RICH versus being wealthy
is there a difference?
Understanding the difference between being rich and being wealthy is crucial, and the choice ultimately lies with you.
Most people mistakenly believe that being rich and being wealthy are the same. However, rich dad, as Robert Kiyosaki's mentor, enlightened him about the distinction between the two.
Rich dad explained, "The rich have lots of money, but the wealthy don't worry about money".
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While being rich may involve having a substantial amount of money, it often comes with significant expenses that create financial stress. These expenses can include mortgages, car payments, credit cards, private school tuitions, and more.
In essence, being rich often means striving to keep up with the Rat Race, which is a cycle that Rich Dad's board game, CASHFLOW®, aims to help individuals escape. If you're rich, you likely have a high-paying job to support this lifestyle, but it also means you have to work every day and fear the possibility of job loss.
On the other hand, being wealthy means being free from these worries. But what sets wealth apart?
Many people misunderstand the true meaning of wealth. They often confuse wealth with being rich, which simply entails having money to spend but lacking genuine financial independence. To define wealth, R. Buckminster Fuller, an exceptional thinker, described it as "A person's ability to survive X number of days forward". In financial terms, this translates to questions such as, "How long could you survive without working, based on the money you have?"
These questions can be challenging for most individuals because they lack sufficient savings and assets to sustain themselves for more than a few months, or in some cases, even weeks. Truly wealthy people, however, have achieved financial freedom by possessing assets that generate consistent cash flow (passive income) to cover their living expenses and more.
If they desire, financially free individuals no longer need to work. Their assets generate enough income to sustain their lifestyle. And that is the true definition of wealth.
About National Achievers Congress
Success Resources' hallmark event since 1993, the National Achievers Congress was the event that started it all with over 5,000 participants.
National Achievers Congress to tour around the world including Australia, Singapore, Malaysia, South Africa, Amsterdam, India, United Kingdom, Germany, Dubai, Taiwan, China and Philippines.
Many speakers have shared their stage for the past 30 years of National Achievers Congress including Anthony Robbins, Robert Kiyosaki, Jay Abraham, Les Brown, Grant Cardone, Gary Vaynerchuk, Nick Vujicic and many others.
💰 Wealth Number
Rather than measuring wealth solely in terms of money, it is better to assess it in terms of time. This is what we refer to as the Wealth Number.
Discovering your Wealth Number involves two critical components in the question, "If you (or you and your partner/spouse) stopped working today, how long could you survive financially?"
✔ The first part emphasizes a scenario where you no longer receive paychecks from your job or business. There is no income flowing in from those sources.
✔ The second part considers how long your money would last based on your current standard of living, without downsizing your house, selling your car, or making significant lifestyle changes. It is an assessment of your financial survival given your existing expenses.
The path to wealth entails defining your Wealth Number. To calculate it accurately, consider your money, including savings, CDs, retirement accounts, liquid stocks, and physical gold and silver. These are assets that can be converted into cash today. It DOES NOT include selling personal belongings that would lower your current standard of living. Also, take into account cash flow from dividends, rental real estate, and other investments that generate income without your active involvement.
Additionally, determine your monthly expenses by carefully examining your bank and credit card statements for the past three months. This will provide an accurate understanding of your average costs. Be thorough in including all your expenses, as the aim is to expand your financial means to match your desired lifestyle, rather than living below it.
Even if you have performed this calculation before, it is important to revisit it periodically. Finances are dynamic, constantly changing, so reassessing your Wealth Number will offer valuable insights into your financial progress.
💢 CRUNCH THE NUMBERS 💢
Once you have a clear understanding of your total monthly expenses and the sum of money available to you, it's time to calculate your wealth. The formula is simple:
By dividing your available money by your monthly expenses, you'll arrive at your Wealth Number. This number represents the measurement of your wealth in terms of time, specifically in months.
For example, if you have $25,000 in total available money and your monthly expenses amount to $5,000, dividing $25,000 by $5,000 gives you 5. This is your Wealth Number, indicating that you could sustain yourself for 5 months with the money you currently have, without the need to work.
So, whether your wealth number is 24 (representing 24 months) or 6 (equating to 6 months), this calculation reveals the exact number of months you could survive without work if you or both you and your partner ceased working today.
Now, it's time to ask yourself, "What's your number?"
👓 Facing the reality
For many individuals, this calculation can be eye-opening and sobering. It brings the state of their finances front and center, providing a realistic and revealing snapshot of their current financial standing.
For a significant portion of people, their wealth number is 3 or less, indicating that they could survive without paychecks for three months or even less. They find themselves living paycheck to paycheck, and some may even have a negative number, implying that they spend more each month than they earn.
Remember, it doesn't matter what your number is. Your number is simply a reflection of your current reality. There's no need to judge it as right or wrong or constantly stress over it. It is what it is, plain and simple.
Now that you have taken the time to figure it out, you possess knowledge that most people will never bother to acquire. Most importantly, armed with this knowledge, you have the power to take action and change it if you choose.
🎉 Understanding retirement philosophies
Now, let's incorporate your wealth number into your retirement plans. There are two contrasting perspectives on retirement: the traditional way and the Rich Dad way.
The Rich Dad philosophy sets itself apart from conventional financial philosophies and strategies. The majority of financial planners, experts, spokespersons, and journalists base their retirement plans on two assumptions:
> You will have a fixed amount of money for retirement that earns minimal interest.
Your standard of living during retirement will be lower than when you were working due to the loss of a salary or paycheck, along with rising medical expenses as you age.
In contrast, the Rich Dad philosophy does not make those assumptions. Instead, we operate under the belief that:
> You have passive income flowing in each month, equal to or surpassing your living expenses, indefinitely. This means you never have to worry about running out of money once you retire or stop working.
> Your standard of living can either remain the same or even increase during retirement. That's why we calculate the wealth number. Just imagine being 70, 80, 90, or even 100 years old and knowing you're on the verge of running out of money — a dreadful situation.
How do you define wealth? Now, take a closer look at your finances. Are you rich or wealthy?
If seeing your number in front of you brings about unhappiness or even distress, that's a good thing. It means you're recognizing the need for action. Consider attending a educational workshop to learn about building long-term streams of cash flow or explore free tools that can enhance your financial intelligence. It's never too late to make positive changes that will enhance your future.
❗️ Important Note: Please DO NOT regard the recommendations found in this blog or any of our opinions on them as investment or tax advice.
About National Achievers Congress
Success Resources' hallmark event since 1993, the National Achievers Congress was the event that started it all with over 5,000 participants.
National Achievers Congress to tour around the world including Australia, Singapore, Malaysia, South Africa, Amsterdam, India, United Kingdom, Germany, Dubai, Taiwan, China and Philippines.
Many speakers have shared their stage for the past 30 years of National Achievers Congress including Anthony Robbins, Robert Kiyosaki, Jay Abraham, Les Brown, Grant Cardone, Gary Vaynerchuk, Nick Vujicic and many others.
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