In the last article (Finding Financial Freedom), we defined an asset as anything that gives you more money than it takes from you per time. And we closed by saying that lasting wealth and financial freedom is determined by the type of asset you acquire more of. There are basically two types of asset:
Active Assets and Passive Assets
An active asset is one that requires your time and energy input for it to keep generating income. Your job, business/businesses, career, are all active assets because your input is needed one way or the other. You can also call this active wealth creation.
A passive asset is one that does not require your time and energy input to generate income. This means that you continually receive income from the productive efforts of other people’s work based on your part ownership of the entities and systems under which they do this work. You can also call this passive wealth development (I chose to use “development” for passive wealth because it has to do with the benefits you receive from the wealth that others create actively (only your money is involved, not your inputs).
The picture below shows the pros and cons of both types of assets:
The secret is to use the income from your active assets to develop your passive assets (through investments) until your passive income (not the passive assets themselves) can maintain the lifestyle you want. In other word use your active income to make yourself and your family truly wealthy. The more you invest the sooner you achieve this goal.
Now this is the reality about wealth: until 70% or more of your income comes from your passive assets you’re yet to experience true wealth with peace of mind. What I’m saying is this: the money you make from your job, businesses or career is important and can, no doubt, make you rich. But the truth is; as long as this remains your only source/sources of income, it means you will remain a slave to money; you will keep working hard but hardly have time to enjoy the money you work so hard for and may eventually lose the wealth you have worked so hard to create.
And this is sadly the present reality of over 99% of the world’s population. They work hard for an economic system which rewards them for their work input (Jobs, business, career). Yet they struggle financially through life because they do not realize that true wealth is ownership of the same economy that is being built by their hard work.
The basic difference between the truly wealthy and the others is this ownership mentality; they continually use parts of the income from their Jobs/career or businesses to own parts of other people’s businesses/organizations.
What this means is that for you to experience wealth with peace of mind (consistent financial increase, financial security and financial freedom) you need to go beyond the money (no matter how little or how much) you make from your job/career or businesses (what these have in common is that they all depend on you!) and start owning the same economy your job/career or business contributes to by investing in the core businesses of that economy! – This is the secret to wealth.
In the next article we’ll look at why so many people do not invest and you shall be shown an interesting solution to this problem.
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