To put it bluntly, financial education in America sucks. There is truly no other way to put it. But, I can understand why. Most Americans cannot save or do not want to save. The few others, that make it a point to save, are investing diligently into their TSP or 401k retirement accounts. Even fewer have brokerage accounts, and many of those are looking for the next hot stock, such as Telsa or Shopify. Most of us do not learn about Passive Income. This is an elusive word that is mostly saved for the rich or well off. It’s funny that the word Passive Income doesn’t come up more often in middle-class circles. I am grinding towards passive income by working my military job. My retirement and TSP are both considered passive income. The truth is that retirement planning is only the first part of creating a comprehensive passive income plan.
To clarify, some retirement plans are buying a home, earning a pension, reducing expenses, understanding social security, moving to the correct state, and investing in a 401k. Just by doing these, you will be ahead of 85% of Americans. Again, these are the first steps toward building a comprehensive plan. However, when we only plan our retirement like this, we are limiting our resources and forcing ourselves to live on a fixed income. Out 401k is still tied to the stock market, so we have to be very careful when we take out our funds. Social Security is always an unknown asset. Our homes can also have variable costs as well. This is nothing to say about traveling and helping family members out. So how can we increase our income and still enjoy our retirement lifestyle? Passive Income.
Passive Income can come from multiple sources. Again, our retirement is a source of passive income. However, creating more passive income streams will allow us freedom of money, movement, resources, time, and worry. We need to change our mindsets in order to create passive income streams. They are everywhere. Once you have the eye for building passive income, your word will change forever. I have read many books and also started building my passive income streams. Nothing feels better than earning money without working a job. Let’s take a look at the difference between a standard retirement individual and a passive income individual.
Real Estate:
Standard Retirement: Pays off house and lives there forever. Pays $1,000 a month in taxes, insurance, and maintenance.
Passive Income: Pays off house and lives there forever. Rents out 2 rooms for $1,200 each. Pockets $1,400 a month in passive income.
Standard Retirement: Sells big house. Buys a small condo for cash. Lives there forever.
Passive Income: Keeps big house and rents it out. Buys a small condo for cash. Pockets $2,500 a month passive income from rental.
Investments:
Standard Retirement: Starts withdrawing from 401K at age 60. Each year balance of the principal amount lowers.
Passive Income: Learned about dividend investing. Uses dividends from a brokerage account to live from. Starts taking required minimum distributions from 401k at age 72. Uses this money to buy more dividend stocks, bonds, and preferred stocks.
Business:
Standard Retirement: Starts a business to supplement retirement income. Opens a coffee shop and is tied to working from 5 am to 9 pm every day. Doesn’t feel very retired.
Passive Income: Evaluates all possibilities and starts a business that can be automated, ran by someone else or sold. Decides to start a blog and write books. Works completely on his own schedule. People can read his blog and buy his book 24 hours a day.
Working Years:
Standard Retirement: While working from age 22-62, works hard. Comes home and relaxes to an ice-cold beer. On weekends goes fishing and boating. Doesn’t invest time into self. Only invests into 401k and primary residence.
Passive Income: Learned about passive income at age 45. Uses free time to create a business that can be sold. Also, invest in dividend-paying stocks and buys 4 rental properties. Is able to retire at age 55 and keep building and buying assets.
Legacy:
Standard Retirement: Is known as a hard worker and a smart person. Leaves the 2 kids one house to split. 401k has $500,000 to be split by the kids as well. Didn’t get to visit grandkids as much as they would have liked due to having to work.
Passive Income: Is known as a hard worker and a smart person. Leaves the 2 kids 8 houses to split, $5,000,000 in investment accounts, and 3 businesses. Was able to visit kids and grandkids but more importantly teach them about passive income, investing, business, real estate, and earned income.
As you can see, the lives of a standard retirement and passive income retirement are similar. They both worked hard and were loved. In the end, that is all that counts. The main difference was that during the working years, the passive income investor decided to convert some of his free time into self-education. This self-education allowed him to build confidence in his job, real estate investing, stock market investing, and creating businesses. This knowledge not only paid dividends for himself but for his family. He is able to not only pass down assets but information and knowledge. Hopefully, this knowledge will give the younger generations a headstart into building amazing lives. So who do you want to be, the standard retired person or the passive income person?
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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