http://blog.lendingclub.com/2008/03/10/wealth-is-relative-to-those-around-you/ The Official Lending Club blog Sun, 29 Jan 2012 13:31:47 +0000 hourly 1 http://blog.lendingclub.com/2008/03/10/wealth-is-relative-to-those-around-you/#comment-635 Roger Steciak Mon, 10 Mar 2008 19:34:41 +0000 http://blog.lendingclub.com/2008/03/10/wealth-is-relative-to-those-around-you/#comment-635 Wealth is not the value of your assets, but rather the cashflow that is produced by your assets. Once your investment income exceeds your living expenses (including taxes), you can live on your investment income forever. You are financially free and don't have to work for a living anymore (unless you choose to do so for nonfinancial reasons). In practice, of course, you might want to have a margin of safety (i.e., your investment income exceeds your expenses by a considerable amount) to allow for unforseen circumstances (e.g., your expenses increase suddenly or your investment income drops suddenly). But the overall point is that it's the cashflow produced by your assets and not their value that really matters. To get to the point where your investment income exceeds your expenses, you can both increase your investment income and reduce your expenses. Paying off debt reduces your expenses. So does living frugally. Investing wisely (including lending wisely on people-to-people lending sites) increases your investment income. Financial freedom does not guarantee happiness. But it can certainly help when you don't have to worry about how you are going to make ends meet anymore. Wealth is not the value of your assets, but rather the cashflow
that is produced by your assets. Once your investment income
exceeds your living expenses (including taxes), you can live on
your investment income forever. You are financially free and don't
have to work for a living anymore (unless you choose to do so for
nonfinancial reasons). In practice, of course, you might want to
have a margin of safety (i.e., your investment income exceeds your
expenses by a considerable amount) to allow for unforseen
circumstances (e.g., your expenses increase suddenly or your
investment income drops suddenly). But the overall point is that
it's the cashflow produced by your assets and not their value that
really matters. To get to the point where your investment income
exceeds your expenses, you can both increase your investment income
and reduce your expenses. Paying off debt reduces your expenses. So
does living frugally. Investing wisely (including lending wisely on
people-to-people lending sites) increases your investment income.
Financial freedom does not guarantee happiness. But it can
certainly help when you don't have to worry about how you are going
to make ends meet anymore.

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