Marty and his wife live at home with their 2 children. They own



a 3 bedroom house in a middle class neighborhood and try to live

within their means. Marty works full time in the Printing

Industry, while his wife is in charge of the home and looking

after the children.

They've accumulated some credit card debt and have 2 years left

on a car loan. They try to stay out of debt as much as possible

and together they've managed to contribute a total of $32,000 to

their own Retirement Fund. It is kept in term deposits receiving

5% interest annually.

Two years prior, the couple bought an older house that they

fixed-up and rent out for $850 a month. After paying the

mortgage and taxes $300 is left over each month. This goes into

their savings account each month.

At Christmas, the family bought themselves a new computer and

decided to start a home-based business. Things started out

fairly slowly but after 8 months they were receiving a steady

check of $400 a month which also goes into their savings

account. This part-time business will continue to grow with the

effort they dedicate to it.

This business also offers them some very lucrative tax savings.

By taking advantage of these Tax Strategies they are able to

save an additional $300 a month on tax that was normally

deducted from Marty's paycheck at work. This monthly income is

also added to the couple's savings.

Marty has just begun writing an E-book about his "production

expertise" at work. His plan is to market this book on the

internet for profit

Every Sunday the couple takes a drive to stay familiar with the

Real Estate market in their area. They're looking for another

property, a "handyman's special" to fix-up and rent out. They

have saved enough for a down payment and their credit with the

bank is well established.

The family's total monthly expenses are $2000. Now, here's the

question:

Does Marty's family have Wealth yet?

To answer this question properly you first have to understand

exactly what "wealth" means.You achieve wealth when: *Your

Passive Income is the same or greater than your Expenses.* So

what does this mean?

First, what is Passive Income?

Passive Income is money that you are paid over and over again

for work that you only do once. (This excludes using a gun or

finding cash on the street) Some examples of this would be

royalties for writing a book or a song, commissions that you

receive for sales that others make and interest from bank

savings or dividends on stocks/options that you own.

Second, what Expenses are we talking about? This one's a little

easier to understand. Expenses are the total amount it takes to

run your household and your life. This includes, rent, mortgage

payments, car insurance, food, credit card and loan payments,

etc....

Let's look at Marty's family a little closer........... Does Marty

have any Passive Income? Yes he does. Marty's salary is not

considered Passive Income. That's because he has to work 40

hours a week just to get the basic amount. If Marty doesn't go

to work then he doesn't get paid. His overtime also doesn't

count as Passive Income.

The interest from their Retirement Fund does though. It's paid

to him month after month as long as it's left in that account.

So, $32,000 at 5% is $1600 a year. Divided by 12 months equals

$133 a month in interest. Ok....what else?

After the mortgage and expenses are paid with the rent money

they receive on their rental property they are left with $300

every month. This is Passive Income. Just as long as the tenant

stays and pays his monthly rent.

How bout that $400 from the home-based business and the Tax

savings. Is this Passive Income? Well, Marty's wife made sure

that she chose a company where she could sign new business

accounts and get paid commissions on those accounts over and

over again. They've made a 5 year commitment to build this

business part-time. So yes, both the $400 and the $300 in Tax

Savings would apply as Passive Income. Let's add up Marty's

total Passive Income.

Interest $166.00 Rental Income $300.00 Home Based

Business$400.00 Tax Savings $300.00 Total $1166.00

Not including Marty's salary from work, his family's Passive

Income is $1166.00. Not bad. Every month this amount flows into

the family's bank account, regardless of anything else they do.

We said that Marty's monthly expenses total $2000.00 a month.

And we also said........... You have Wealth when: *Your Passive Income is the same or greater than your Expenses.*

$2000 Expenses subtract $1166 Passive Income = $834 monthly

balance needed to have Wealth.

Marty's Expenses are still more than their Passive Income so

they're not wealthy just yet. But they're well over half-way there. With this kind of knowledge a family can know exactly where to focus their financial attention.

Maybe when Marty writes that ebook he could get some sales and royalties from it. Also the new Real Estate and more work on

their Home-based business would certainly help them to attain

more Passive Income. Once Marty's Passive Income is more than

the family's Expenses then Marty could start to have much more

freedom. He may even choose to quit his job and continue

developing his Passive Income streams.

Take a look at your own finances. What are your monthly

expenses? Do you have more Passive Income than your Expenses? If you do Congratulations. You're Wealthy!!! If you don't. It's time to get started and start adding Passive Income from other areas as soon as possible.

When you truly understand this principle, you'll be well on your

way to becoming wealthy

Did you find this article useful? For more useful tips and hints, points to ponder and keep in mind, techniques, and insights pertaining to real-estate, do please browse for more information at our websites.