The ‘rat race’ popularized by the guru of ‘Rich dad, poor dad’ Robert kiyosaki It’s what most of us are in when we have to get up every morning and go to work.
Although many of us may be happy with this situation, very few of us realize what we are doing with our lives and think that there might be a better way to earn a living and ‘get by’.
Work essentially consists of selling your time for money at a fixed rate, which is your salary. For the economy to work as a whole, the employer buys your time and gets more out of it than it pays you, so the old adage “You, as an employee, are working to enrich your employer” applies.
To begin breaking free from this ‘linear’ method of earning a living, you must learn to supplement your income with ‘additional passive income streams’. Additional, because they can be additional to your work salary and liabilities because they ‘take care of themselves’ and work in the ‘background’ of your life.
Passive income usually involves a bit of work to set up, and then you can generate regular income (which can be forever!) By doing a bit of “work” to maintain it.
The best, although not the simplest example of passive income, is renting a property. The downside to this is that it has a large initial capital outlay. Real passive income “streams” start with no cash outlay and build up into substantial income “rivers” over time.
The idea is that when you rent a property, tenants pay you rent on a regular basis, so you can really calculate how much you are going to earn each month. This is fixed passive income. The initial “work” is that you need to set up the rental property with furniture, etc., decorate it, and then advertise it.
As a bonus, if the real estate market is buoyant, you’ll get a capital appreciation on the asset in addition to getting a rent, so this is doubly good. However, capital appreciation is not part of the passive income equation.
As stated above, you will need to do a bit of work to keep the project going: replacing furniture, paying bills, and maintaining the property, but overall the work is minimal, the important thing is that it does not require ongoing attention so you could go on vacation and keep earning your property rental. Here’s the real benefit of passive income – it works when you don’t!
Another example of passive income is the buying and selling of stocks and shares. Now I know this involves risk (as many passive income companies do), but the idea is simple. Buy stocks in a solid company that you are sure will be around for years to come and hold them.
The important thing to learn here is that the passive portion of the income is any paid ‘Dividend’ of the shares, not the increase in the value of the shares. As in the property example, there may be a substantial increase in the ‘Capital Appreciation’ part of the equation, but the passive bit is in the regular dividend payments. These will vary, so this model is not as fixed as the rental in the previous example.
Both examples require a lot of money up front, but they are not the only examples.
Now that you know the term ‘Passive Income’ when it comes to money, you can start thinking of ways to earn money without having to ‘work’ to get it.
