There are some key words you will need to become aware of as you journey towards becoming financially independent.

Assets – Items or investment vehicles that have been acquired and that provide a monthly cashflow.  Robert Kiyosaki (of Rich Dad fame) describes an asset as something that puts money into your pocket every month.

Cashflow – The amount of money an asset generates after all expenses are paid.  Often measured monthly.

Financial Independence – Not needing to work for money because you have learned the necessary skills to have your money generate more money with little intervention from yourself.  When you are financially independent you have left the Rat Race.

Liability – An item you own or are paying for that takes money out of your pocket each month.  For example car loans or the mortgage on your personal residence.

Passive income – this is income that you have for which you do not have to work.  This cannot be income from employment.  Passive income occurs when your money is working to make more money.  You have a fairly passive role in managing it.  Passive income can come from the stock market, rental real estate, or owning businesses.

Rat Race – where most people find themselves.  Somewhere between working to live and living to work.  More details on the Rat Race page.