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Nov 11

The More You Learn the More You Earn

The more you learn about money and finances the more money you can earn. We are living in the information age and these days earning money and building wealth is generally a matter of brains over brawn. The saying of ‘the more you learn the more you earn’ is especially relevant today.

Although, you can’t just learn anything you want and expect to become rich. If you want to earn more then the most important thing that you learn is financial intelligence. Often you see smart people such as doctors and lawyers who do not have much financial intelligence. Although they can earn a lot of money at their jobs they do not know what to do with their money and thus never become truly rich.

One of the defining factors of being truly rich is being financially free. Being financially free is having the freedom to never have to work again. You can only have this freedom when your passive income (income that you don’t have to work for) is great than all of your expenses.

Wealth is not measured in ‘net worth’ like many of the banks measure wealth. Wealth is measured in time. To put it simply, wealth is the amount of time you could survive without working. If you have $1,000 saved and your monthly expenses are $2,000 then you have 15 days of wealth.

When you passive income is the same as or greater than your expenses you are financially free, because you can live indefinitely without working. Being rich is not just having a certain amount of money in your bank account, being rich is having an abundance of money and time to do the things that really matter to you.

So in order to become financially free and become rich you need to learn financial intelligence. The more financial intelligence you learn the more passive income you can earn. Below are some things that are foundational to financial intelligence.

Assets and Liabilities

Knowing the difference between an asset and a liability is foundational knowledge if you want to have any success financially. Rich people buy assets, poor people buy liabilities. This is why the rich get richer and the poor get poorer. So you need to know the difference between assets and liabilities and you need to buy assets.

So what exactly is the difference? Well to put it in extremely simple terms, an asset is something that puts money in your pocket and a liability is something that takes money out of your pocket. Rich people focus on increasing their cashflow by buying assets. If you want to be rich you need to buy assets that generate you cashflow.

Earned Income and Passive Income

Earned income and passive income is very different (it is even taxed differently). Rich people focus on creating passive income, while poor people only ever generate earned income. Earned income is income that you have to work for. You are limited in the amount of earned income you can earn because you can only work so much. But passive income is income you don’t have to work for, and you are not limited in the amount of passive income you can earn.

So if you want to be rich (and I suspect you do) you need to learn the difference between earned income and passive income and you need to focus on attaining passive income.

Saving Money and Investing Money

Poor people only save money, this is a risky thing to do. Rich people invest their money by buying assets that generate income. The reason saving money is risky is become money is constantly becoming less and less valuable due to inflation. So by saving money you are actually losing money because your money is going down in value.

Rich people leverage other people’s money to buy assets that both go up in value as money goes down in value and also that generates an income from passive income.

So the saying ‘the more you learn the more you earn’ is true if you are dedicated to learning financial intelligence. If you learn financial intelligence then your potential income is limitless.

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