Wealth, Net Worth and Financial Independence are actually three totally different things.

These terms are interchangeable by most people, but they are actually quite different.

My definition of a "truly wealthy" person is one that can stop working today and live without ever having to actually "work" for an income again.

My measurement of "wealth" is how long you can last if you had to stop working today. Could you survive a year? Ten years? Twenty years?

The longer you can survive without working, the wealthier you are. For me, wealth is about creating free time, and the TRULY WEALTY not only have more than enough passive income to fund their lifestyle for the rest of their lives as well as gerenate capital gains.

Now, "Net Worth", is calculated by adding up the market value of ALL your assets (market value is what you could realistically sell them for today), and subtracting ALL your liabilities.

Now I know some seriously high net worth individuals that have a lot of assets, plus a lot of debt. They may have huge net worth, but they have created a life that does not give them the time to enjoy this high net worth. Net Worth, for me, is just a number that tells me how much someone has amassed. However, it says nothing about how much free time they have to enjoy their life, time spent with loved ones, time spent doing things they love.

Then there is the scenario where someone may live in a (say) $5,000,000 house with little or no mortgage. This person may have made their life's focus, the obtaining of an expensive & beautiful home, and that is what they see as the "asset" that defines them as wealthy. However, though that person may be "classed" as a high net worth individual (and they are), in reality, because they have put all their net worth into their home, they have no actual cash flow, and as such still have to trade their time for money (ie. work).

Hopefully, you have read and understood my earlier lessons where I discussed that an individual may have a high net worth, but still not have financial independence.

You see, one cannot live off capital gains, unless they sell.

Financial Independence is, for me, is the ultimate goal.

You see, if your chosen lifestyle requires a passive income of (say) $200,000 per year, and you manage to achieve that via passive investment income, and not by working, then you are financially indepedent - it's that simple! When you achieve financial independence, you have managed to create a life where your passive income funds your lifestyle, and your time is free to do whatever your heart desires.

You may not be "seen" to be wealthy by others, but these others are still going to work every day to fund their living expenses, while you manage to live life on your terms and not have to work. I know which I would rather be!

Funnily enough, I didn't figure this out until later in life - in my forties.

What most people seek is not "to be rich" as such, what they actually seek is financial independence. They want to have the time and the money to live their life doing whatever they want and whenever they want.

What I decided I wanted, was financial independence - to not work, yet still have enough passive income to travel the world every year, replace our vehicles whenever we wanted, live where we wanted and do whatever we wanted and whenever we wanted to do it.

I needed to create the passive income that would allow us to do all of this.

What is funny, is that I achieved this years before I actually retired. However, even though I was financially independent, I was still following my "wealth creation plan" - out of habit.

As a result, I worked longer than I needed to, but also as a result, I now have a passive income that is more that I could ever spend, so it just keeps building.

I could have retired earlier IF I had made financial independence my actual plan!

Work out what your ultimate end-game is.

What do you really want to achieve?

What is the actual end goal you want?

I have a feeling it will likely be financial independence - what do you think?

Questions to consider:

1. If you stopped working today, would you be able to survive for the rest of your life on passive income, without ever having to work again?

2. If you stopped working today, and assuming that you are able to survive for the rest of your life on passive income, without ever having to work again, would you be worth more 10 years from now, or 20 years from now, or even 30 years from now? In other words, would BOTH your passive income AND value of assets keep increasing over time to at least keep up with, or beat inflation (preferrably the latter)?

If you answered "Yes" to question 1. Then you will have achieved financial independence.

If you have answered "Yes" to BOTH questions 1 and 2, then you are not only financially independent, but you are also TRULY Wealthy.