We have come a long way on our investing train, and we arrive at our final stop today. Now that we know exactly what to do with our money, we need to make a lot more of it.
But we don’t want to do all the work; we want our investments to carry the load. What we need is a wealth generator.
Welcome back to the Middle-Class Investing 101 series (101, 102, 103, 104, 105, 106, 107, 108, 109), where we make, keep, and grow our income.
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What is a wealth generator? A wealth generator is an asset that produces asymmetrical returns—you receive returns of 60%, 80%, or even 150%.
The stock market is not a wealth generator for a couple of reasons. First, you are not in control of the outcome; second, it’s tough to get annual returns over 10-12%.
No, we need an asset that gives us an infinite return. An infinite return is something where we have no money invested, but it still produces income for us.
Exploring infinite returns. Before finding our wealth generator, let’s explore infinite returns. I will give a couple of examples to drive the point home.
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Let’s say we borrow $10,000 on a barn house, and the monthly payment is $200/month. We immediately rent it as a self-storage unit for $300/month—we are in an infinite return. We have none of our money inside the investments.
Even better, we can pay off the loan quickly and receive the $300/month as pure profit. This can be a wealth generator because you are printing money.
Another example is video recording anything you love doing daily. If you love knitting clothes, baking cakes, or designing book covers, just record and post daily.
It costs you nothing, and you are already doing it. However, someone on the internet will be interested in achieving your success or creativity.
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You may not become the next YouTube star, but you can make passive income from doing what you love. This can be your wealth generator because it is in an infinite return (it costs you nothing).
Finding your wealth generator. Your wealth generator can be something super simple. Plus, it doesn’t need to make you a ton of money.
However, you need to understand how to print money. Printing money means creating cash from the source; you don’t depend on a stock, bond, job, or loan.
I wrote the “From Dirt to Dividends” series exploring farming wealth generators. The idea is to start a farm or homestead and sell excess fruits, veggies, or herbs.
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This is a wealth generator because you are growing your income. Once you have a wealth generator, invest this money into the stock market to keep it growing.
MJ DeMarco wrote two influential books on wealth generators, “The Millionaire Fastlane” and “Unscripted: The Great Rat-Race Escape,” that everyone should read.
My wealth generators. My first wealth generator is the US military. Working a job is not a wealth generator, but the military pension system meets the requirements.
Once I retire, I will get an inflation-adjusted paycheck (via cost of living adjustments) for the rest of my life. That’s not bad for 20 years of service.
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While in the military, I can save and invest, get a college degree, and start a business. I can come out far ahead of my peers at age 40.
My second wealth generator. My second wealth generator is writing books and my website. Yes, I am taking a slow approach to writing and building a blog.
I don’t advertise, guest visit podcasts, or attend blogging conventions; I just keep writing. However, writing and publishing have minimal costs ($300/year).
I make more than that from the business, so I am in an infinite return. Even better, my business has the potential for exponential growth by providing value to the internet. The more people you serve, the richer you become.
I Have Everything I Want In Life and Then Some
The best wealth generator of all time. Software as a service is probably the best wealth generator of all time. Think about the annual fees Microsoft and Adobe charge individuals and businesses.
However, this is beyond the scope of most people in the middle class. The best wealth generator available to us is RENTING ROOMS.
Everyone wants to live alone because we can’t stand having others around. However, if you can find a good match, you BOTH can print money!
“The House-Hacking Strategy” explains the math of renting rooms. Housing is our most costly expense, so we win big if we can reduce or eliminate it.
Become a Lifelong Learner. Become Rich.
When my wife and I started renting rooms in 2019, we were in debt. But, slowly, we began to feel like we were getting ahead.
We started to see extra money in your account at the end of the month. Our car payments disappeared, our credit cards evaporated, and our loans went “poof.”
It is magical. Words cannot explain when you go from $77,000 in debt to debt-free. Then, you can use all that cash flow to destroy debt or build up your dividend portfolio.
Sadly, most people will not leverage renting rooms to escape the rat race. My wife and I amassed $300,000 in savings and investments in less than four years.
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Start searching for your wealth generator. Finding a wealth generator is about something other than huge numbers; it is about printing money.
You have to find something that works for you. It may start small, but you can keep building it into a low-cost income stream.
Let’s say you like to knit fancy clothes. You can start by selling your products for three times the cost. Then, as you knit, you can record yourself.
You post the videos to YouTube and slowly find an audience. Once you reach 5,000 subscribers, you take three months to create a Beginners Knitting Online Course ($100).
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You insert a link to the course on your YouTube, and one percent (1%) of your subscribers buy the system. That is 50 people for a profit of $5,000.
Conclusion. You invest that $5,000 into a closed-end fund like PDO, and now you receive $45/month for the rest of your life.
It only takes a few of these amazing feats to become financially comfortable. You created a wealth generator with little work.
You love knitting, and you built an audience of people who also love knitting. What a fantastic time to be alive.
The Magic of an Automated Business
You can find your wealth generator right around the corner, but you must cultivate it. It is not going to build itself.
It’s essential that you think about scale and size. You may own two vending machines, but do you want to grow it to another 100?
How about starting a YouTube channel about vending machine maintenance, placement, cleaning, and restocking? That channel has the potential for asymmetrical returns. And that’s how you create a wealth generator. 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. All Right Reserved Military Family Investing
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