Creating passive income is the reason why my website and books exist. Consider this article a way to get back to our roots and boost our motivation for ensuring we have the best retirement we can build through hard work, education, and planning.
The strategy I use for retirement planning is my plan called Retirement 4-50– it consists of four pillars of passive income. The four pillars are retirement income, investment income, rental income, and business income.
Now, refer back to your dream numbers from Cash Flow 101. How much cash flow did you need to live your dream life throughout retirement? I hope that you dreamt big and didn’t hold anything back. Now we need to put our plans in motion. Let’s look at our four pillars and start to brainstorm ideas to build our passive income streams.
Become a Private Money Lender
Retirement Income. Our W-2 employment is how we fund this pillar of passive income. I have a defined benefit pension coming my way from military service. You may not have this but use your 401K instead. On top of these methods, you have other ways to create passive income. My go-to website for this income source is Kiplinger’s Retirement.
The other ways include traditional IRAs, Roth IRAs, social security, insurance plans, health saving accounts, and annuities. These sources of income are what mainstream media focus on- almost religiously. Most people will never stray out of this source of income. If you are working a full-time job, you owe it to yourself to get smart on all of these income types. The article “Is Saving Money Bad” goes more in-depth about retirement income.
Investment Income. Dividends and interest make up this passive income pillar. If you don’t know anything about these income forms, I wrote a few articles on stock market investing and real estate investment trusts. These articles are an excellent start to navigating your way through the stock market. My go-to website from investing is Seeking Alpha.
Take your time when investing. The stock market is not a get-rich-quick scheme- it is not meant to be a wealth generator. Once you find ways to create income, the stock market is a way to make a small return on this money. However, finding other ways to make large sums of money is a must. Real estate and business are excellent wealth generators and should be used to get your money system started.
Print Your Own Money
Rental Income. The world of real estate is vast and has many different models to make money. My favorite saying is, “Real estate is the best wealth generator for the average person.” This quote means that with financial education and real estate knowledge, the average person can make tons of real estate money. Real Estate is the I.D.E.A.L. investment. My go-to website for rental income is Bigger Pockets.
The main reason real estate is accessible to most people is because of leverage. Leverage can be a double-edged sword. Leverage can magnify the good and also heighten the bad. Be careful out there. Ensure that you are reading and using the appropriate investment personnel (tax accountant, business lawyers, property managers) to build your portfolio.
Business Income. You can divide business income into two categories; royalties and residual business income (automation). Royalties usually come from creative pursuits such as music, art, photos, videos, and writing. Once you create these forms of work, the royalties come in passively. That is why I enjoy this form of income. Once created, these are almost entirely passive. The website I use for business income is All Business.
What is a Sales Funnel?
An automated business takes more effort to get started. However, the upside potential is a lot higher. When starting a business, always plan to remove yourself from the equation of making money. For instance, if you create a brick-and-mortar shop, how can you run the shop without being there? Management, automation, and out-sourcing our terms we need to learn in this pillar. Please read the article “Automation and Your New Business.”
Putting all together. Now that we understand all the different passive income sources, we need to build our personalized “stable” of income. Your choices depend on what you are comfortable with, what you have access to, and how involved you want to be.
My current “stable” consists of retirement income from the military, a dividend investment portfolio, three rental properties, and royalties from Kindle book sales. Over time I expect to add an automated business to my portfolio and perhaps a few more rental income sources. My main goal is to “work” roughly one to two hours a day. If I wanted to work more, I could create a more significant business or obtain more rental properties.
It is essential to understand that all of these sources of income “synergize” or work together. By combining these sources of income, you can grow your portfolios exponentially. For example, if you own an apartment building, you can blog or write books about your experience. The military was my wealth generator, so I can become a consultant to young people who think about joining. Many people want to learn about living from dividends, and I can create a YouTube channel about investing for retirement.
Nobody Owes You Anything
The goal is to have our income coming in as passively as possible. Nothing is entirely passive, and that is okay. The idea is to avoid “easy” work and challenge ourselves to create passive income from sources other than a W-2 job.
A good example is driving Uber. If someone needs to earn an extra $700 a month, chances are they would start to drive Uber. It is easy to get started, and the path to earning income is straight-forward. But, if that same person took a year writing books for Amazon, they could probably reach up to $700 after twelve months. The difference is that once they stopped writing books, they would still earn $700 a month. With Uber, the money stops as soon as the driving stops.
Using this example, we need to evaluate all of our future earning potentials. Yes, if we are a skilled web designer, we can make money on Upwork. But, let’s take a step back and ask how we can make money without directly working. Can we create an online course on web design? Can we teach 3-4 people how to design and have them sub-contracting all of our work? Learning to take a step back and remove ourselves from the equation of making money is the key to Cash Flow.
Wealth is a Mindset
Removing ourselves from the process of making money allows us to earn money while we sleep. Creating passive income is a process upfront. However, if done correctly, you will be earning money while you sleep, eat, and spend time with family. The concept of making money all day, every day, is the takeaway I want you to remember from this article.
The best way to get started is to visit the above websites every day. You can begin to brainstorm ideas on creating passive income through royalties and business. Renting rooms or basements is an easy way to get started in real estate. You can create an investment account today and deposit $5 a week. The barrier to entry is not very high.
The main barrier is education and motivation. The topics I refer to are not mainstream. You will probably be the only one in your circle who thinks like this. However, it feels good to have money coming in at all times of day and night. I love it!
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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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