How can we beat inflation? Well, I guess if we can keep making more and more money, then we have a chance to outpace inflation. How do we keep making more and more money? Therein lies the rub.
Our jobs are not going to keep increasing our pay to keep up with inflation. We may get a cost of living increase pay raise once a year, as we do in the military. However, this new inflation is going to hit at crazy times and whenever it wants. It is also going to strike whatever commodity that it wants.
One day it may be groceries, meats, fruits, cars, houses, or timber—we have to prepare for anything. We can’t possibly work more hours at our earned income jobs. Americans are already the busiest individuals in the world. There has to be another way.
The Magic of a Roth IRA
You must separate yourself from the act of making money. Your money needs to work for you, not you work for money. These quotes may seem confusing, but once you understand them, you will understand the concept of passive income.
Separating yourself from the act of making money involves creating a way for you to make money 24 hours a day/ 7 days a week. In today’s world, the easiest way to do this is through the internet. If you establish a storefront or content portal on the internet, anyone anywhere can access your wares.
Each time I publish a book on Amazon, I am allowing millions of people the opportunity to buy my goods. I may get one or two sales, but that is okay. Books have an extremely long duration. I may get a sell once a year, but it is still passive income.
Now, as I am doing other physical work, either at my job or working on writing, my books are out in the world making money for me. I have an army of assets whose only job is to add value and make money, FOR ME. That is how you beat inflation.
You also need to have your money work for you. If you were to put five dollars into an old pair of jeans and leave it there for a year, the chances are that you have lost money. Oh, your five dollars would still be intact, but its buying power will have diminished over this year—this is called inflation.
Standard Employee by Day, Passive Income Hero by Night
For example, let’s say inflation hits us for 3% over that year. When you stuffed your pocket with five dollars, you could buy a pint of ice cream for precisely five dollars. After a year, your pint of ice cream would cost $5.15.
If you would have invested that five dollars into AT&T (T) stock at a 7% dividend yield, you would have kept roughly that five dollars in value in the stock market. The price of AT&T has not appreciated much in that year; however, you would have received four payments of roughly $0.09. This would have been a total of $0.36 for the year, for a total amount of $5.36. You could buy your ice cream.
You see, instead of you working another ten minutes to capture that $0.36, the AT&T stock did the work for you. That is how your money works for you. Again, we call it passive income because you are not actively making it through earned income work.
Don’t Gamble with Your Retirement 3
The total package. Once you have your complete passive income train moving, there is no slowing you down. If done correctly, you will have money flowing in from all angles and during all times. It really is something to behold. Let’s take a look at one of my months of passive income.
Dividends. I have five brokerage accounts, all filled to the brim with dividend stocks. Not only do I add money to my dividend portfolio each month, but the companies are also increasing their dividend payouts throughout the years. I wake up and see $1, $10, or even $50 dividends being dropped into my account. It makes your day to have a nice, phat dividend drop into your wallet (via the Cash App).
Royalties. Royalties come in from my book sales. You do not know what each day brings; however, all the work is already done for your books. You have created something, and now its job is to make you money. And surprise, you feel great when you make a sale. Job well done, and money keeps coming in passively.
Rents. Rents come in consistently and are usually raised once a year. However, there are many things you can do to increase your income from property, such as refinancing your home or adding valuable storage space to your property. You are in complete control of rents, and they almost function as their own businesses. Real Estate is truly a wealth generator.
I Live Paycheck to Paycheck 2
When you have all of these things firing on all cylinders, it would be hard for inflation to catch you. By reinvesting back into your passive income portfolio, you will be compounding the effect of cash flow and making the biggest income stream you can.
An example of reinvesting would be making money from book sales, which do not cost much to publish and investing that money into your dividend portfolio. The same with renting rooms and using the free cash flow to buy a Tesla rental car; you can do these to make even more passive income.
By having a passive income mindset, you can destroy inflation, get rich, add value to people’s lives, and protect yourself and your family for generations. So why don’t more people do this? Because it takes knowledge and hard work to set up your passive income.
You cannot just set up a healthy dividend portfolio without knowledge of REITs, Closed-End funds, bond funds, and “blue chip” dividend stocks. Real estate and royalties also require a level of expertise that is not taught in school.
Cash Flow 105: Diversify Your Passive Income
I am not saying that it is hard because it is not difficult. It is surprisingly easy to set most of these things up; however, knowledge and education are missing pieces for most people. Then you add in discipline and working during your off-hours, and people do not want to do this.
You can be different. You have the opportunity to start creating passive income now. Even if you go and buy $5 of AT&T stock today on your Cash App, you have officially put your money into a 7% yielding vehicle. You just keep doing that until your dividend payouts are $500-$600 each, even higher. That’s how simple it is to start.
So will you choose to beat inflation, or will inflation eat your cash? It is entirely up to you. Passive income is the way to defeat whatever is coming next over the following years. We have no idea what will happen, but we have to assume the worst and aim for the best. Good Luck!
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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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