The One Number That Tells You More About Your Financial Health Than Your Bank Balance

If you want to know how someone is doing financially, the first thing most people look at is their bank balance or their net worth. We are conditioned to believe that a high net worth equals financial success. But over the years, I have realised that this number is almost entirely meaningless when it comes to measuring true financial health.

I know people who are incredibly successful on paper. They have a net worth in the millions, beautiful houses, and amazing cars. They are at the top of their game professionally. But they are also slaves to their success. They are locked into a rhythm with such high monthly costs that they cannot afford to stop working. If they miss a couple of payments on the house or the cars, their entire world—their image, their ego, their social standing—will collapse.

On the other extreme, I know people in the poorer parts of Bolivia who have absolutely no financial security. They work for the day. If they earn enough by 11:00 AM, they stop working and go home. They have no savings, no plan, and no future security. But they are relaxed. They enjoy the moment, living day to day without the crushing weight of financial stress.

Neither of these extremes represents true financial freedom. The high-net-worth individual is trapped by their expenses, and the day labourer is trapped by their lack of capital. True financial health lies somewhere else entirely. It is not measured by how much money you have. It is measured by a single ratio: your passive income versus your monthly expenses.

The Problem with the FIRE Movement

When people start looking for an alternative to the traditional working life, they often discover the FIRE movement (Financial Independence, Retire Early). The core philosophy of FIRE is simple: keep your costs as low as possible, be incredibly frugal, and invest everything you can until the monthly returns from your investments cover your lifestyle.

The math behind FIRE is solid. The goal is to reach the point where your monthly fixed costs equal the returns you receive from your investments. But I fundamentally disagree with the way the movement encourages people to get there.

FIRE encourages you to put a massive amount of effort into becoming frugal. It asks you to spend as little as possible so you can reach your financial goal quickly. But who actually wants to live like that? Optimising your life purely to be as frugal as possible often means sacrificing the joy and experiences that make life worth living in the first place.

My wife and I decided to take a different approach. We didn’t want to optimise for frugality; we wanted to optimise for a specific lifestyle.

Designing the Lifestyle First

We knew we wanted a certain kind of freedom. We wanted to travel with our kids while they were young. We decided to take them out of traditional school and homeschool them. We sold our house in the Netherlands because we wanted the ability to move to the places we wanted to visit, taking our time and enjoying every day without worrying about income.

Achieving this meant making significant adjustments, but it didn’t mean we had to stop working entirely on day one. Instead, we made sure my wife could do her work in as few hours as possible each week, from anywhere with a decent internet connection.

We didn’t aim for an arbitrary net worth number. We simply started balancing what we spent against what we were getting out of our investments. We shifted our focus away from growing our total net worth and instead optimised our investments for cash flow. We wanted investments that produced a reliable monthly return that we could actually live on.

Today, between my wife’s reduced hours, our online businesses, and our investment returns, we bring in more than we spend. We reinvest the surplus. It happened organically because we were moving toward a lifestyle, not just a number.

How to Start Moving the Needle

If you are currently in a situation where your passive income covers almost nothing, the idea of reaching financial freedom can feel impossible. But the first step is not necessarily to start investing aggressively. The first step is to reclaim your energy and your peace of mind.

If you hate your job but are dependent on the salary, start by changing your lifestyle until you can afford to quit. Do not be a slave to your situation. Be respectful of your feelings and your worth. There is no house, no car, and no social standard that is worth staying in a job that breaks your spirit.

If you have a huge mortgage that is killing you, keeping you awake at night, and affecting your relationships, you have to make a change. Prioritise your peace over what society expects you to do. The kind of house you live in or the car you drive does not matter at the end of the day.

When you reduce that pressure, you gain something far more valuable than money: energy. You need peace of mind to make the right financial decisions. You need energy to learn new skills, start investing, or build an online business on the side. You cannot build the life you truly want if you are too exhausted from surviving the life you currently have.

Leveraging What You Have

At the end of the day, it doesn’t matter if you have a huge amount of money or very little. What matters is the feeling you have every day. You have to design your life so that you can create that feeling using the tools available to you.

Maybe that means building an automated online business. Maybe it means staying at your current job but negotiating to work remotely, using AI and technology to minimise your hours and maximize your efficiency. We are often so absorbed by our day-to-day routines that we don’t have the energy to even think about alternatives. But those alternatives are very possible.

Do not let the fear of losing your image or failing to meet social standards be stronger than your will to change. Start tracking the only number that matters: how much of your life is funded by your assets rather than your time. When you focus on that ratio, every financial decision becomes clearer.

If you are ready to start building the skills and the mindset required to make this shift, the Modern Wealthy programme is an excellent place to begin. It provides the practical framework for creating income streams that don’t rely on trading your time for an hourly wage.