This is the first in this series of posts on passive income. We will look at the various ways you can create passive income. I have written about passive income many times on this blog. Passive income is also called residual income or recurring income. It is critical to any wealth creation plan as it is income that continues to be generated after the initial effort to create it has been expended.
In this series I am going to look at the various ways you can build a passive income. I will also examine what is really “passive” and discuss that not all passive incomes are created equal.
Passive Income – why do you need it?
Passive income or residual income has always been important but now in today economic reality it is critical. Why? Because without it you will be working until the end of your life . Do you think your government will take care of you in your old age?
I have a Business Degree, qualified and worked as a CPA for many years and then had a financial planning business. I subscribed to the idea that I would work until I had enough money put away to retire. I advised my clients to do the same.
I like most people prior to the Global Financial Crisis (GFC) subscribed to the idea that putting money into a retirement fund was a good idea. In Australia employers must pay into their employees Superannuation Fund. At the time of writing it is 9% of their annual salary. Superannuation is like a 401K in the USA.
We all know what happened to many people’s retirement nest eggs in the GFC and now many people do not know how they will ever retire. The only way I know is for you to build a residual income. An income that will be paid to you month in month out for the rest of your life.
Passive Income – what is enough?
Robert Kiyosaki invented a board game called CashFlow. In this game the objective is to get out of the Rat Race and into the fast track. The way you do this in the game is to build your passive income to be greater than your living expenses. In the game you can land on things like “divorce” “being downsized” tax “audit” and other things that happen in life.
If you have not played the game and you are even vaguely serious about building your financial security then I really encourage you to play it. I have played it 100s of times and I learn something about myself and my relationship with money each time.
As I worked with Robert Kiyosaki and we sold the game I know many students of his. We formed a group several years ago and played CashFlow regularly. We graduated to playing in teams which was really interesting and I found I learned more about my behavior in this situation.
Robert says “how you play the game is how you play in life”. I think it is better to learn about attitudes that do not support our success in business and investing by playing a board game than by having the lessons in real life.
I am not suggesting you will not have any “learning experiences” in real life because you played the CashFlow game but you will get to know more about yourself and the choices you make. It is a good way to get those subconscious beliefs you may not know you have out on the table.
Passive Income – the true road to freedom
It is only by having a passive income that you will build true freedom. And it does not have to be only for retirement. There is a growing number of young people who have found a different way to do their lives. They are building passive incomes and living lifestyles that allow them to travel and follow their dreams.
This concludes my first part in this series of “Passive Income”. My following posts will look at a variety of ways you can build a passive income and the pros and cons of each method. We will also look at using leverage to build your passive income.
Please leave me your comments on Passive Income below. Are you building one? Do you see the importance of building a passive income? If you found this post of value please share it with your friends.
P.S. If You Don’t Have a Step-By-Step Blueprint For Generating More Leads, Check This Out (Unless You Already Have Too Many)