Money doesn’t grow on trees; however, we can plant trees that grow money. We can use multiple income streams to create the lifestyle we envision for our family and friends.
But how do we get to the point where our money works for us? Society seems to be withdrawing more money from our accounts than is being replaced.
The average, everyday person can use dividends, royalties, rents, business, and options trading to ensure their financial security and the success of future generations.
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Getting started with multiple streams of income. If you are not rich, your first stream of income should be your job. Many YouTubers and TikTokers will tell you that you don’t need to work, but I’m here to tell you that you do.
Directly following your job, the most critical income stream comes from your dividend portfolio. You must quickly feed all additional income into your dividend portfolio because it will ultimately free you from the workforce.
If you are creative, you can create income by writing books, recording podcasts, filming YouTube, snapping photos, creating music, or drawing art. We call this royalty income. Royalties are challenging to develop but only require a few upfront costs.
You can also create an incredible income stream by becoming a landlord and collecting rent. However, there are even more ways to gather rental income without owning properties. Some of these include renting rooms, clothes, cars, or parking spaces.
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All of these income streams work in unison to feed your dividend portfolio. Your dividend portfolio will continue to pay you more until you can live entirely on dividend income one day. But one more type of income stream can supercharge your finances—options trading.
Why options? Why now? Trading options get a bad reputation from the general public because the general public should not be trading options.
To trade options successfully, you need a bigger financial picture than just wanting to make more money. You must think of options trading as one of your many income streams rather than as a way to quit your job early.
Options trading is vital to your financial success because it can serve as a staple in your entertainment budget. Think of it as hunters a long time ago. What you hunt, you eat.
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It’s the same with options. If you make $1,000 in opinions, you can use that to take your family to dinner, go shopping, or travel to a new destination.
The average person can live the life of their dreams by trading options part-time. However, beyond the financial risk comes a heavy emotional toll. Options are only for the average person who can withstand adversity and loss.
The emotions of options trading. The good part is that everyone can learn to deal with losing. Options trading is so emotional because the stock market can make you feel like an idiot rather quickly. A sure thing can promptly go 300% in the other direction.
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However, you can take steps to prevent yourself from feeling overwhelmed or betting far more than you can emotionally afford.
The key to trading options within your risk level is comprehending how much money is at stake. Once you understand how much money you can make without risk, you can determine your risk profile.
Removing the emotions of options trading. Let’s say you have $5,000 sitting in a high-yield savings account earning 4%. You would earn $200 in annual interest. That means you can make a risk-free return of roughly $17 monthly.
This is an excellent start to how we can build our options trading profile. Now, we can take $1,000 out of our HYSA and move it into our brokerage account (I use Charles Schwab).
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Once approved to become a level 2 options trader, we can use the $1,000 to start trading options. However, we don’t want to use the entire lump sum to play around; we don’t want to risk everything.
We can invest the $1,000 in index funds and use leverage against it to “create” another $400. We can make plays using $200 at a time.
It’s fair to say that you can make $100 per month from this portfolio once you get the hang of things. Don’t forget that you’ll need to read books to find the play style that suits your temperament and aggression level.
Understanding how valuable it is to trade options. I hear you saying, “Josh, $100 per month is a lot of money!” I disagree. Let’s look at the numbers again.
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You made a risk-free $200 per year on a $5,000 high-yield savings account. Using options, you made $1,200 on a $1,000 budget. This also doesn’t include your index funds growing at roughly 10% annually.
Your return on your options account was 120%—or more than double. Imagine having a $5,000 or $10,000 options portfolio. The money can become quite real quite quickly.
When you trade options, you must manage your fear and greed. That’s why option trading is so emotional; you can control when you take a loss or profit.
You can easily be up over $1,000, but you feel the stock price will continue to rise. You wake up, the stock has retreated, and you are down $1,000.
The best way to control your fear and greed is to compare your returns to risk-free ones, helping you stay grounded in reality.
The Most Challenging Part of Passive Income: Enjoying It
Last week, I won a profit of $2,000, trading with $7,000 in leverage. I was sad for a little while because I watched the stock price of Palatir (PTLR) climb from $21 (where I took profits) to $25. If I had stayed in, I would have walked away with nearly $5,000 or more.
However, I just took a breath. I looked at how much an annual risk-free return on $7,000 is—$280, and I thanked the lord for this fantastic play. I showed grace, appreciation, and thanks for letting me create more money from my money.
The average person can trade options. Everyone’s dream job is to work from home, work their own hours, and be beholden to no one. We can all get there with dividends, options, rental income, and royalties.
However, we must do the work. There are steps to understanding how to create money from thin air. The first step is to envision your dream life. Who is with you? Where will you all be? How much money will you have?
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From there, you must understand how to budget. There is no point in making more money if it disappears into the air. Control every dollar that comes into the household; every penny has a purpose.
Once you have a tight budget and create some breathing room, you will have the foundation of a beautiful life. Now, you just need to start adding income streams.
I would start by investing for interest and understand all the nuances of Treasury bills, notes, and bonds. Next, you can move into index funds, dividend growth, and income investing.
After a year or two of learning the basics and building a $ 500-per-month dividend portfolio, it’s time to look into options.
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Conclusion. So it may take two years to trade your first option contract, but that’s okay. Most people jump in, get burned, and jump out—don’t be like these people.
If you learn the ropes, you can create an income stream you can use for your entire life. Imagine paying for your vacations and entertainment from your options trading debit cards.
To live like the rich, you must follow in their footsteps. If you can create a portfolio that generates 50% annual returns, you’ll outpace inflation by a mile.
To trade options successfully, you must control your “fear and greed” emotions. You can do that by comparing your plays to the risk-free rate of return. This will help you stay grounded in reality. Good Luck!
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