Paulio Money

Wednesday, January 04, 2006

Definition of Wealth

Some day I want to be wealthy. But what does that mean? The best definition of Wealth I've seen comes from the book Rich Dad, Poor Dad, by Robert Kiyosaki. Wealth is when your passive income exceeds your expenses.

Passive income is money you get every month from investments that basically run themselves, from your point of view; they require very little interaction from you to continue making money. For example, if you own a rental property, the tenants pay rents to you every month. Any money left over after property expenses and paying the mortgage is yours to keep. The property made the money, not you; you didn't have to work "per hour" at a "job" to get it. But, you get to keep it! That's passive income.

So think about this. When you have so much investment property that the passive income totals more than your total cost of living for that month, guess what - you don't have to work at a "job" anymore! Your Passive Income exceeded your Expenses.

You have a lot more freedom, then. You're Wealthy.

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