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Your Current Level of Wealth and Financial Goals
By Mike Wang | August 2, 2007
Author: Mike Wang
It is very important to set clear financial goals so that one can develop effective strategy to achieve it. The level of wealth that you wish to obtain would require a specific set of strategy. For example, the plan used to earn a monthly income of $20,000 would be very different from a plan that can be used to earn $200,000. Only when you know the exact amount that you wish to achieve in a certain timeframe then can you seat down and formulate effective and realistic strategy and plan to achieve your goals.
Wealth is not determined by the amount of money inside your bank account but rather by how long a period he or she can sustain their lifestyle if they stop working. This is the reason why we must learn to save and invest our money so that we can achieve financial freedom and not get stuck working in that job. You can calculate your current level wealth by answering the following questions:
- How many liquid assets do you have? This refers to the amount of cash or equivalents that you have to pay of your monthly expenses. These are assets that you can convert to cash within a month.
- What are your money expenses? How much to spend a month, including interest payments on loan and recurring monthly payments.
- How much passive income do you have? These are sources of income that will continue even if you stop working.
You can compute your level of wealth by taking the amount of liquid assets that you have divided by your monthly expenses less your passive income. This is the number of months that you can sustain your current lifestyle without working. You can see that if you desire to sustain your current lifestyle without working you must work on building multiple streams of passive income.
The next article would talk The Four Levels of Wealth.
Topics: Finance |