This is the formula for being rich.
Total monthly nut < Passive income.
"Total monthly nut expenses" is a financial term that refers to the total amount of money needed to cover a person's basic living expenses each month. It includes all the necessary expenses that a person or household incurs on a regular basis, such as:
- Housing expenses (rent or mortgage payments, property taxes, utilities, maintenance, and repairs)
- Food expenses (groceries, dining out, and snacks)
- Transportation expenses (car payments, gas, insurance, maintenance, and public transportation)
- Healthcare expenses (insurance premiums, copays, prescriptions, and medical bills)
- Personal care expenses (toiletries, haircuts, and other grooming services)
- Clothing expenses (clothing purchases and dry cleaning)
- Entertainment expenses (movies, concerts, hobbies, and other leisure activities)
- Debts and other financial obligations (credit card payments, student loans, and other loans)
Passive income is income that is earned without requiring active involvement on a regular basis. In other words, it is income that is generated through investments, business ventures, or other sources that do not require ongoing effort or labor.
Passive income can come from a variety of sources, including:
- Rental income from real estate properties or other assets.
- Dividend income from stocks or other investments that pay regular dividends.
- Interest income from savings accounts, CDs, bonds, or other fixed-income securities.
- Royalties from intellectual property such as books, music, or patents.
- Capital gains from the sale of assets such as stocks, real estate, or businesses.
- Affiliate marketing or advertising revenue from websites or other online platforms.
- Network marketing or multi-level marketing (MLM) businesses that generate ongoing commissions from sales made by downline members.
Passive income is often considered desirable because it allows for greater financial freedom and independence. With passive income, an individual or business can generate revenue without having to actively work for it, which can provide greater flexibility and opportunities for other pursuits. However, it's important to note that passive income still requires some level of initial effort, investment, or risk to set up and maintain.
The definition of being rich can vary depending on individual perspectives and circumstances. However, in general, being rich is often associated with having significant financial wealth and assets that exceed one's basic needs and allow for a comfortable and luxurious lifestyle.
Here are some common ways that being rich may be defined:
High net worth: Being rich may mean having a high net worth, which is the total value of a person's assets minus their liabilities. The exact threshold for what is considered "high" may vary, but it generally involves having a significant amount of financial assets, such as cash, investments, real estate, or business ownership.
Lifestyle: Being rich may also be defined by a luxurious lifestyle that includes expensive homes, cars, vacations, and other indulgences that are beyond the reach of most people.
Freedom: Being rich may provide a sense of financial freedom that allows a person to pursue their passions and goals without worrying about financial constraints.
Generosity: Being rich may also be associated with a willingness and ability to give generously to charitable causes or help others in need.
IMHO, being can be summarised as
- When your monthly nut is less than your monthly passive income.
- When you have the choice/freedom to WORK when you want to, with whom (corporate vs business owner) you want to, and at the pace you want to.
- The passive income sources are diversified enough to provide stablility.
- One has sufficient financial knowledge optimize returns from the assets and make the right moves during turbulent market conditions.
Another point is most RICH have positive attitude/relationship with money. In India, most families have villainised money and many including myself had the aversion towards the rich and had a negative outlook towards money. This is not a good thing IMO, one should be grateful towards lakshmi/Money, she provides/facilitates for everything including food, childrens education, house and security, not to mention the TOYS (Cars and bikes). One thing I practise is say Arigato money, during any transaction (Google it) another is get myself educated on money management.
Here are 10 of the top books for creating wealth:
- "Think and Grow Rich" by Napoleon Hill: This classic book outlines the steps for creating wealth through positive thinking, goal setting, and other success principles.
- "The Richest Man in Babylon" by George S. Clason: This book provides timeless advice on personal finance and wealth creation through simple yet effective strategies.
- "The Millionaire Next Door" by Thomas J. Stanley and William D. Danko: This book provides insights into the habits and behaviors of wealthy individuals and offers practical advice for building wealth.
- "Rich Dad Poor Dad" by Robert Kiyosaki: This book challenges traditional thinking about money and encourages readers to adopt a mindset of wealth creation through smart investing and entrepreneurship.
- "The Science of Getting Rich" by Wallace D. Wattles: This book provides a practical, step-by-step approach to creating wealth through the power of positive thinking and action.
- "The Automatic Millionaire" by David Bach: This book provides a simple yet effective system for achieving financial independence through automated saving and investing.
- "The Total Money Makeover" by Dave Ramsey: This book provides a step-by-step plan for getting out of debt, building an emergency fund, and achieving financial independence through smart budgeting, investing, and planning.
- "The Wealth of Nations" by Adam Smith: This classic book is a foundational work in the field of economics and provides insights into the workings of markets, trade, and wealth creation.
- "The Intelligent Investor" by Benjamin Graham: This classic book is widely regarded as the definitive guide to value investing, providing a comprehensive framework for analyzing stocks and other investments.
- "The Simple Path to Wealth" by JL Collins: This book offers a straightforward approach to building wealth through low-cost index funds and a disciplined savings and investing strategy.