THE MYTH OF PASSIVE INCOME
The holy grail of investments – a magic money machine that churns out money on a regular basis without you having to worry about where the money is coming from. Knowing that the money will keep on coming gives ultimate peace of mind and the owner of this magic money machine can just sail away into the wide blue yonder and live happily ever after. That was how I saw passive income. The very title gives it away. The definition of passive for me was not having to do anything. It’s very interesting that, as I go to Google for a definition, there are telling phrases that give the game away.
Passive – accepting or allowing what happens or what others do,
without active response or resistance.
And that, my friends, is why passive income is a myth.
There are lots of different kinds of income streams but, in order for the stream to keep flowing freely, it needs to be maintained. And before it can be maintained, it needs to be obtained. And, before it can be obtained, you need a method of obtaining it. And, before you do obtain it, you need to be sure that it is an investment stream that interests you. And THAT is the key to maintaining a healthy flow.
Let’s go back to the beginning or rather, let’s start again.
Let’s go back to the idea of a continuing income stream because that is what we all need regardless of our background, beliefs, ability to earn money or grow an investment. Unless you are born with a silver spoon in your mouth and can benefit from previous generations we all start with nothing. So that’s where I’ll start this journey – nothing, no skills, no education and maybe even no job.
Task number one: get a job. That, at least, will give you the start of an income stream.
Task number two: improve your skills to get a better job; a promotion or a new, better paid job
Task number three, runs concurrent with task number 2: start learning to live within your means. However difficult this may seem, this is the one discipline that you can rely on to help you get the elusive income stream which you desire.
Task number 4: start learning about investments. This is the information age. You can learn anything about anything on the Internet. The question is not which investment is the best. They can be all good and they can be all bad, depending on your knowledge. Knowledge is the answer. Relying on other people’s advice for your investments is not a good idea, and I speak as one who was a financial advisor in a previous life. Financial advisors are so heavily regulated that they can only give advice in a certain order. Many of them are not rich, they are giving advice on what they have been taught to do but what they are not doing themselves.
My own particular investments have been heavily within property. I invested in myself before I invested in property. I learned how to do it in such a way that, even though the property market was high, I managed to survive the crash of 2008 that wiped many property investors out. When you buy is only one factor. How you buy, where you buy and what you buy also come into it. A lot of people moved into property on the success of TV programmes such as “Property Ladder” and “Homes Under the
Hammer”. I watched these programmes too and was horrified by the mistakes that people made, things that would have been avoided if they had invested in themselves before they invested in the property. By the way, despite what Robert Kiyosaki says, property is definitely not passive.
Learning about investments, learning about how the rich people preserve their money is always going to stand you in good stead. Whatever you want to do in life, find someone who has already done it and copy them.
As you continue living within your means, find a way of increasing your income, whether that is an online business or monetising a hobby because this is the income stream that can help you start your investment income stream. It won’t be passive (and it shouldn’t be passive, even stocks and shares change in value and outlook as the market changes) but at least it should be sustainable without too much input from you.
Learning about investments is just as important as buying the investments themselves. You need to understand how your investment works so you can understand how healthy it is. Don’t look for passive income streams. Look for residual income. That way you know you have to look after your wealth and, in return, your wealth will look after you.
Please leave a comment and let me know the best way you have found for looking after your wealth.