Wealth is Measured in Time
The terms "rich" and "wealthy" are usually used interchangeably. However, Robert's rich dad made an important distinction between the two, saying, "Rich is measured in money and wealth is measured in time. Most people focus on getting rich rather than becoming wealthy."
Dr. R. Buckminster Fuller, a world-renowned architect, futurist, inventor, and visionary, also measured wealth in time. He defined wealth as:
A person’s ability to survive X number of days forward.
In other words, if you (or you and your partner) stopped working today, how many days could you survive financially on the money you have – maintaining your current lifestyle?
In order to calculate your wealth, you first need to determine what your monthly expenses are. Next, calculate how much money and assets you currently have. Remember, this exercise assumes you do not have income from a job. Once you know your total monthly expenses and your sum total of money available, you can determine your wealth by dividing your total sum of money available by your monthly expenses. This gives you your wealthy number, measured in months. Here's the formula:
Total amount of money ÷ total monthly expenses = wealth number (months)
For example, if your total amount of money is $25,000 and your total monthly expenses are $5,000, then you divide $25,000 by $5,000 and you get 5. This is your wealth number. It means that you could survive for 5 months on the money you have currently available without working.
According to the Rich Woman definition of financial independence, a woman is financially free when she no longer has to work for money because her money is working for her. In other words, she has more money coming in every month from her investments than is going out in monthly living expenses. In this case your wealth number is infinite – you could survive (theoretically) forever from the cash flow that continues to flow into your pocket every month.
Most people are only familiar with capital gains investing - buying something at a low price, selling it at a higher price, and pocketing the difference. In other words they are focused on trying to get rich. When you focus on investing for cash flow, you are focused on building your wealth, creating passive income that earns you money without depleting or selling the original asset.
Here's to your wealth!