They told us to work hard and earn money but didn’t tell us how to allocate it. Moreover, they have enough advertising and marketing to ensure we misspend our cash.
We may not have much wisdom in our 20s, but we sure have a lot of time. If we can make a few solid financial decisions—nothing earth-shattering—we can turn the tides of our future earning potential.
The most important decision we can make, outside of who we marry, is how we pursue passive income streams. Passive income is the essential tool most people overlook when planning for a Happy Cash Flow Retirement.
How to Channel the Velocity of Money
Therefore, if we can engage in and create passive income in our 20s, we will be well on our way to financial freedom. Financial success gives us a much better chance of enjoying a successful relationship.
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What is passive income? Working a job is vital to survival, especially if your parents are wealthy. Therefore, you should pursue all the education and training you need to increase your earning potential in the workforce.
But this journey is just the beginning. There is an entirely different set of rules outside of working for corporations and businesses—this is the world of passive income.
Passive income is a scenario where you do not actively exchange time for money. It is the creation of a system that works without your direct input.
Leaving the Workforce on 10 Years
Passive income is the conversion of money (or capital) into income-producing assets, and passive income is the conversion of time into income-producing assets.
So, let’s evaluate how a 20-year-old can convert money and time into assets that produce income for the duration of their lifetimes.
Converting money into assets. An asset is something that produces cash flow, and you can pass it down to other generations.
The final part is an important distinction between an asset and a pension (or social security); you cannot pass these along to others.
Many people spend their entire lives securing a government pension that expires when they do. That’s why it’s essential you focus on collecting assets at an early age.
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If you have trouble distinguishing between assets and liabilities, I recommend reading “Rich Dad Poor Dad.” Reading this book changed my life beyond anything else I have ever done.
To convert money into assets, you must first secure the money. Many young people complain about starting at the bottom of a corporation or government. They say they do not make enough money to survive.
I absolutely agree. You don’t make enough money if you expect to rent an apartment, drive a decent car, pay your utilities, have a nice cellphone, and go on date nights at age 21.
America has sold you a lie; the true American dream starts at the bottom. The sooner you understand this fact, the faster you’ll rise from the ground level.
Life is a Math Game
Living below your means. The most worthwhile philosophy a young person can adopt is to live below their means. This means sacrificing their independence or lifestyle to save and invest money.
Living below your means is the fastest way to accumulate capital, and investing capital is the best way to become rich. Let’s examine the process.
Let’s say you earn $3,000/month working as a 21-year-old full-time restaurant cook. Your parents graciously let you stay with them for $400/month.
The first year you work to pay off a car. By year two, you only have to pay for gas, rent, and insurance. You are able to save $1,500/month.
These are outstanding numbers for a young person. For context, there are doctors earning $300,000/year that don’t save $1,500 in one month.
Now, what do you do with the $1,500/month? After saving a $3,000 emergency fund, you invest the following cash flow into AT&T (T) and Verizon (VZ).
Your Income Should Increase Every Year 2
These corporations pay dividends every three months. AT&T (T) has a 5% dividend yield, and Verizon (VZ) has a 6% yield.
After 24 months of investing $750 into each stock, you have $18,000 apiece for $36,000. More importantly, AT&T (T) would pay you $900 annually, and Verizon (VZ) would pay you $1,080.
Welcome to the world of passive income. After three years of work, you now earn $2,000/year in dividends, or $166/month. You own a car, have an emergency fund, and have passive income—you are well on your way.
Converting time into passive income. In your 20s, you may have more time than money. Luckily, you can convert time into passive income through the power of creation.
That’s right. We are in the internet, information, and creation age. Anyone can become a content creator and start earning passive income.
I’m High on Life with Royalties
It’s important to find your niche through trial and error. Make no mistake: It may take five years before you earn any real money.
The best way to gain a competitive advantage is to do something normal over a long period of time. This means talking about your job, how you invest, and what issues affect you today.
Many people believe they must be extraordinary creators to gain an audience, but that’s not the case. People would much rather follow your journey of joining the military, attending auto mechanic school, or serving in the Peace Corps.
You will be successful if you are honest with your audience, and they will push you to expand your horizons. However, remember it takes 10,000 hours to become great at something (about 10 years at 3 hours a day).
The Magic of Passive Index Funds Investing 2
Putting it all together. So, how do you make passive income in your 20s? You live at home, working a job, investing in dividends stocks while creating content about your life.
I didn’t learn about passive income until I was 38. I also wish I had created more content during my 24 years in the Marine Corps.
However, I started writing on my blog in June 2020. Today, I have 1,600 articles following my financial journey and retirement.
It’s amazing to go back and read my articles and books from 2020. It’s even better when these books sell on Amazon. That is what passive income is all about—you do the work once and reap the benefits forever.
Conclusion. There are more ways to earn passive income, such as trading options or buying a vending machine; however, these are complex.
In your 20s, just focus on the basics: living below your means, staying out of debt, creating an emergency fund, investing in dividends, and creating content.
Scarcity vs. Abundance
If you can do this for 3-5 years, you will position yourself to have a wonderful life without limitations.
Even better, you will find a spouse who enshrines these values of hard work and intelligence. Sounds good, right?
Is this way of life possible? Of course, but you must fight off your friends and family who will call you a bum (by living at home). Most people do not understand the concept of looking toward the future and making decisions based on one’s dreams.
Keep your head down in your 20s. Graduate to your 30s with $1,000/month of passive income, and nothing can stop you. 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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