Wealth gotten by vanity shall be diminished; But he that gathereth by labor shall have increase.
- - Proverbs 13:11

Most of us are pre-occupied with earning money. We pour time, talent, effort and resources into making money. Many employees take on extra jobs or put up small businesses to augment their salaries.




Very often, unfortunately, this drive to earn money is not founded on a meaningful personal financial plan. Financial objectives are not defined. We over-emphasize the importance of more earnings without balancing this out with some initiative and plan to save. Few among us deliberately save a portion of our current earnings. It is as if capacity to earn will not diminish over time. We refuse to see that as we grow older, and our bodies become weaker, our capacity to actively earn will greatly decrease.
This is the main reason very few of us became financially independent by the time we retire from our jobs. What happens most of the time is that when a parent is no longer able to work, it is the children, or other relatives who take over the task of providing for the parent’s financial needs. But this does not have to be the case all the time.

Contrary to common belief, financial independence is within everyone’s reach. Yes it is reachable so long that you are capable of earning active income right now. This is true even if most of us have been conditioned to believed that we will never really have enough as we need to provide for our children’s needs, the needs of their children, and, for some, even for the needs of their grandchildren.


If you are currently employed or if you own a small business, you certainly have the potential to become financially independent in the future. DO NOT FORGET that the key lies in being able to plan, save and build wealth using all the resources that you have right now.

What is wealth? Are you wealthy?

The concept of wealth is usually equated to having lots and lots of money. This is not true. Having lots of money does not guarantee that a person is wealthy.

Are you wealthy if you had 500 Thousand Dollars in your pocket? What about 1 Million Dollars, 10 Million, or 100 Million? The answer lies in your expense profile. If your living expenses are very high because of your lifestyle, or perhaps because you have so much debt, then maybe even if you had 100 Million, you would still be financially short.

Wealth is really a condition where your present financial resources to support your lifestyle over a long period of time even if you do not work to generate income. If you had cash and other assets that can support your lifestyle for say ten years, would you consider yourself wealthy? We must remember that wealth has to be also based on how much time you have left in this world. If you are in retirement a have ten years to go, then you are wealthy enough if you had financial assets good to support your lifestyle for ten years. But if you only have resources good for five years, then we cannot say that you are wealthy enough. In this case, you still have to grow your financial assets or lower your lifestyle to match your financial capability.

Wealth-generation starts with a financial resource. For most of us, or base financial resource is our personal income. It is therefore very important that we have a clear understanding of the character and nature of your income.

We can categorize the income that a person generates into two kinds: One is Active Income, and the other is Passive Income.


Active Income

This income comes directly from your own hard work, skill, talent and time. Once you stop working you stop earning active income.

There are two basic types of active income, namely, Primary and Additional:

Primary Income – Your main source of income: This would be your regular source of earning such as salaries, allowances, commissions, and contractual and/or professional fees.

Additional Income – Income from your “sidelines”. This could be irregular income such as overtime pay, income from “buy & sell”, part time, non-regular earnings from sources outside your primary income, such ass gain from sale of assets and the like.

Active Income is income that you have to work for. It is the engine that starts your journey toward financial independence.

One rule that needs to be strictly followed is that active income should only be used:

  • to fund your living expenses and
  • to fund your savings and investments to generate future income for you.

Active income is reserved precisely to fuel your way towards wealth and financial freedom.

Important reminder: You should spend active income only for your needs. NOT for your wants.
Before you buy a thing, always ask yourself “Do I need it? Or do I just want this item?”. If you just WANT to buy it, then do not buy the item.

Passive Income

This is the income that is generated by your earning assets and investments. This type of income does not depend on your active participation in terms of time, skills or talent.

Passive Income is income you earn even when you do not work. It is an investment income that you earn from your assets and investments or both.

Because passive income is earned from your savings and investments, it has two main purposes:

  • Use it to further increase your investments that will fund your future needs when you have to stop working or when you decide to stop earning active income.
  • To fund your periodic wants. This should be your only source from which you may draw to use for extra things you want from time to time (e.g. better car, nicer watch, fashionable clothes, occasional parties, vacation, etc.)

Passive income represents your true wealth. It is your REAL FINANCIAL GOAL. You must always be aware of the growth or movement of your passive income. It will determine you financial success or failure.

The appreciation of active and passive income is where most of us fail. We rationalize and spend our active income for wants much more than our needs.


Financial Independence

Most of us believe the myth that financial independence means having so much money and assets. As said earlier, we focused purely on earnings and the so-called build-up of wealth.

But what is wealth really? Isn’t wealth just having cash to support your needs at any given time? If you believe this, then you could be financially independent without having very much cash. If your chosen needs are modest, then all you need is a modest level of earning asset and you would be financially independent!

Financial independence is simply having the means to maintain the lifestyle you choose to have without having to actively work. It is a state of economic well being where your personal investments or savings are generating passive income sufficient to cover your expenses consistent with the level and type of lifestyle you want.

Investment Income is the key to Financial Independence. Without investment income, you will never achieve financial success.

For example, as an employee, your monthly salary allows you to have a certain level of lifestyle right now. If you are to become financially independent, you will have to accumulate earning assets and/or investments that will generate earnings that will allow you to maintain your current level of lifestyle by the time you retire.


Stated another way, you become financially independent when you reach that point where you no longer have to work to provide for your basic needs. This means that your passive income, or the money you earn through your assets and investments, are enough o provide for your daily needs such as food, shelter, clothing, education of your children, medical expenses, and even some luxuries.

Financial independence can be achieved at any age. You just need to plan for it. You do not have to wait to be a Senior Citizen before you can achieve financial independence.

Financial independence empowers you to enhance the lives of your chosen community.

Achieving financial independence early on in your life is probably one of the greatest gifts you can give to your family and your chosen community. Without doubt, the ability to share your bounty with others can be the greatest source of satisfaction and the most fulfilling human experience. Being financially independent affords you more opportunities to enhance the lives of others and, through them, even other communities. Isn’t that what money is for? Tool to improve everyone’s well being?

For wisdom is a defence, even as money is a defence;
- – Ecclesiastes 7:12

Saving and accumulating sufficient investments ad earning asset take time. This is one fundamental truth that most of us seem to take for granted. We always assume that there will always be enough time to work on our financial requirements for retirement. Worse, the mentality of those who retire is that their pension benefits would be enough to take care of their needs.

You can also read the following Green Stickman™‘s related articles:
- The Power of Compound Interest and Rule of 72
- Guides in Setting a Financial Goal
- Obstacles in Getting Rich
- Financial Life Stages
- Allies to Financial Freedom


Financial Freedom e-Books that may help you:

Living on a dime-financial independence Legitimate work at home secrets of successful traders

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