“Money is a resource that helps you be free”

Money means different things to different people, ultimately, the only power it has is the power we give it. So don’t give it power over you, don’t be a slave to money, make money a slave to you, make it work for you.

Money and Happiness

Studies suggest that people in rich countries are generally happier than people in poor countries however money only makes you happy to a point and not as much as one may expect. Once a societies wealth rises above the poverty threshold, increases in wealth have almost no effect on happiness. What does improve happiness? Social relations. People that are married, have good friends and are close to their families are happier than those that aren’t.

So why is money one of the pillars? Because, depending on how we earn the money, it can have a huge impact on our freedom and like it or not, in most communities, one of the main measures of success is wealth.

Types of Income

In simplistic terms, there are two types of income:

Active Income: You have to actively work to earn money

Passive income: Your money works for you

My approach is to have a baseline passive income so that if there are months where I am not earning any active income, I don’t have to worry about the money. At the point where I have enough passive income to cover all my expenses, I would still work on the active income because I would go crazy if I stopped, I enjoy coming up with ideas, interacting and hustling too much.

So I work on the active income, spend my time on the entrepreneurial pursuits that I enjoy and that will hopefully make a difference in the world and then use that money to put towards the passive income, leaving a buffer or liquid investments in case I need funding for one of my business ventures.

Spending your income

Try spending your money on buying assets and not liabilities. If you want that fancy car and it’s important to you, save to buy an asset which pays passive income that can pay for your fancy car. That way, when the fancy car is old and scrapped, your asset will still be paying out each month and you can get a new car without needing to “pay” anything in.

If you are simply living month-to-month and feel you aren’t able to buy assets, consider using spend buckets (specific purpose accounts) and paying yourself first to start getting ahead.