SuccessfulMindset

While most of us wouldn’t really need a reason to get paid without doing any work, I think it’s worth talking about the realities of why we all need passive income in today’s society if we ever hope to get ahead (or just break even in some cases).

I guess the first thing I’ll do is clear up that first sentence: you and I will never get paid without doing work of some sort, but the difference comes in how we work - hard, or smart.  A combination of both is the best, but most people haven’t been trained on how to work smart, so they just keep working hard hoping that some day they’ll get ahead…for most people, someday never gets here. 

We get paid based on the amount of value we add to the world.  The more value you add, the more you get paid.  With passive income, we must learn and implement ways that pay us on an ongoing basis for the value we’ve added to other people’s lives.

So, now that we’re clear on the fact that you will never get paid for not doing anything, let’s talk about why it’s necessary.

Income Insurance

The best way I can think of to describe why anybody would want passive or residual income is what I like to call “Income Insurance”.  Think about it: we’ve got insurance for everything…health insurance, car insurance, home owners insurance, renters insurance, life insurance, pet insurance, fire insurance, long term care insurance…we’ve got insurance for everything except our income.  What happens if you’re in an accident in your car?  No big deal - insurance will help cover it.  But what happens if you get laid off, fired, or for some other reason can no longer earn your active income?  Different story, isn’t it?

Passive income through multiple streams or outlets is a form of income insurance because if you lose one, you’ve still got income coming in from the other sources.  This is something that everyone needs - it doesn’t matter where you are in life, and it’s especially important if you happen to have fallen for the lie that if you’re on the fast track in the corporate world you’re “doing pretty well” because of your high salary.  Chances are if you’ve got a high salary, you’re just broke at a higher level - and the fall from that height when you get fired or laid off is going to hurt just that much more because you will have become accustomed to that lifestyle…and if there isn’t something in place to back you up or keep you afloat while you scramble to get another job, life isn’t going to be very pretty.  If you have multiple streams of passive income, or at last one or two that are impervious to market flucuations, you’ve got some insurance on lifestyle.

That’s the practical side of the house - digging your well before you’re thirsty.

But there’s also the fun side of the house…and that gets into Lifestyle.

Here’s my definition of Lifestyle:

Lifestyle: Do what you want, when you want, where you want, how you want, with who you want, without worrying about how much it’s going to cost or getting the time off of work.

That’s true lifestyle - freedom of choice unencumbered by financial restrictions.

The only way that becomes a reality is through passive or residual income.  When you’re in the active income arena, you’re limited by the number of hours in a day and how much your employer is willing to pay you per hour (or per year, which is many times worse than the per hour case once you do the math!).  No matter how hard you try, you just can’t get that 25th hour squeezed into the workday!  And even if you did work 24 hours straight for a day or two, you can’t keep that up very long before you crash for the next 3 days.

Lifestyle = Money + Time

Here’s another definition of lifestyle: Lifestyle = Money + Time.

Everybody knows it takes money to have lifestyle, but what people don’t often think about is that it also takes a time.  What good is the $300k/yr job if you spend 100 hours a week at the office?  There’s no time left to live life and enjoy it with the people you love!  So what if you drive an SL55AMG and have an 8,000 sq ft place…if you only drive the car to and from work and your mansion is a bed-and-breakfast for you, what’s the point!?!?

But flip that around and make $150,000 a year but only have to put in 15 hours a week…now that’s got some potential!  You’ve got money coming in whether you’re really doing anything or not, and now you’ve got the time to go play and enjoy life doing the things you enjoy doing and spending time with the people you like spending it with!  That’s lifestyle.

The question is, “How do we get to that point?”

There are MANY answers to that question, and just as many books on the subject, but a few of the bigger and more well-known methods are:

• Real Estate
• Coin Operated Businesses (car washes, candy machines, etc)
• Network Marketing
• Franchises
• Investments

…and many more.  It all boils down to how many streams of income can you generate that operate and pay you regardless of your involvement with them.

A couple of great books on the subject are Robert Kyiosaki’s ‘Rich Dad, Poor Dad’, ‘Cashflow Quadrant’, and ‘Rich Dad’s Guide to Investing’.  Those are three of the best books on learning and understanding the basics of residual/passive income and what options are available to everyone to create it.

I personally have experience with real estate and network marketing, and can say they are both excellent ways to create passive income – as long as you know what you’re doing!  If you don’t, both can be quite frustrating, time consuming, and money-losers instead of money-makers.  Having a system in place for both is required for long-term success and residual earnings.

Over the course of this blog I plan on getting a little more in-depth on the subject of networking and network marketing.  The technology of today makes this THE number-one way to create long-term & massive residual income – but, as I said, it must be done properly in order to be effective.  And when it is, when you can use cell phones, Bluetooth headsets, video webconferencing, podcasts, Google, blogs, social networks, and any other host of technology available today, you’ve got the ability to create lifestyle wherever you are, whenever you want to!

To your success,
Steve