The Yellow Brick Road to Passive Income: Making Money While You Sleep…
There are two ways to increase your income. Besides decreasing your expenses, the other way is to earn more money. This isn’t as easy at it sounds, especially during these uncertain times. If your fixed costs are more than 65 to 70% of your income even after taking my budget advice AND you don’t want to significantly decrease your standard of living, then you need to increase your income.
The Four Ways to Achieve Income Today
- Employee (You have a Job) – Your level of active work determines how much you can earn and when you earn it. Your work builds a business for someone else. This approach limits your potential if your only source of income.
- Self Employed (You Own a Job) – Your level of active work still determines your income, but everything earned from your output is yours and you control your time. This is better than earning solely as an employee, yet still not enough on average to achieve true wealth.
- Business Owner – You now have people that work with you. This gives you leverage to earn much more! Your business is a system and your income does not depend on your own labor. You have a solid strategy for growing wealth.
- Investor – You now own INVESTMENTS that work for you! Your income does NOT depend on your active work and your money and assets work for YOU!
Lets take a look at each of these in more detail.
Employee
Generally your income here is limited by your time. Yes, you can get a 2nd or even a 3rdjob. You may even get a promotion and earn a higher hourly wage. You are still however enslaved to the number of hours you can dedicate to the activities you are paid for. Your earning potential is limited as a result. Additionally, even while employee productivity has increased exponentially over time, real wages are (except for those of CEOs and the top 1%) not keeping pace with inflation.
Self Employed
Many people have taken the leap from employed to self-employed. This provides you with greater access to tax deductions, plus you no longer need to share the mark-up on your labor with someone else. If you work from home not only does the income generated no longer need to cover office and overhead costs, but your home office becomes tax deductible (a double deduction if you also own your own home).
Business Owner
As a Business Owner – you should leverage systems and employees to multiply your productivity. You can start to step back from the direct work and move into a more strategic, management role. At some point you may be able to step back out of the business and receive the ultimate goal of passive income.
Investor
As an Investor (you can start being an investor while you are an employee) your money (or other assets) are then working for you. You can manage your investments yourself, as an active investment manager/investment business owner, or you can have an expert do that for you – to provide you with passive income. Even better, using advanced investment strategies you can also buy tax free passive income.
Passive Income - The Ultimate Goal
When people talk about financial freedom, either for before or at retirement, they generally are talking about passive income. Income they receive without having to put in work or hours of their own time in return for receiving it. Making Money While You Sleep!
The good news is that anyone can achieve financial freedom with a plan. Not everyone is cut out for or wants to own a business. However, everyone can become an investor and they can buy tax free income.
If you are interested in creating an investment plan to achieve your financial freedom, reach out for a risk free conversation.
