What does your dream life look like? Or, what would you do with your time if you could do anything?
Imagine your dream life for a minute. In your dream life do you still go to to work five days a week?
OK, your dream life might not include lounging around on the beach in Cancun as illustrated above. That life doesn’t actually sound very fulfilling.
I’m not sure what your dream life looks like, only you can answer that one. But what I am pretty sure about is that your dream life doesn’t include working at a job for someone else for the next 40 years.
So how do you get to a point where you can live your dream life, and how do you pay for it? No, you don’t have to win the lottery.
Whatever your answer for your dream life looks like, there is an easy way to pay for it without having to work for the rest of your life. It’s called passive income, and it is a powerful tool. With it you can shape your dream life to look like whatever you want. Let’s take a look at traditional earned income and compare it with passive income.
Earned income vs Passive income
With earned income you swap your time for money. You work, you get paid, you spend, you work some more, you spend some more, you work again. Most people use up 40 to 50 years of their life working and spending and eventually retire in their 60’s or 70’s. That’s the traditionally sold American dream, and it’s an OK model. The problem of course being that an overwhelming majority of you would rather not spend your days at work, and most people are actually downright unhappy at work. Even those of you who love your jobs could probably figure out something more interesting to do with your time.
On the other hand, with passive income all the time spent working is upfront. You work, then invest the earnings into something that pays a dividend, and then you spend the dividends. See the difference? You never actually spend your hard earned time and money – rather, you spend the returns generated from investing that time and money.
The best thing about passive income is that you are only spending the dividends, the work is a one time expenditure of your energy, not a recurring undertaking. The earnings from that upfront work continue to pay you forever. Once you create enough passive income you’ll never have to work again should you choose. It gives you the freedom to live your dream life.
Create passive income and start living your dream life
There are many ways to create passive income. Anything that you can invest in that pays dividends is passive income. Anything that you can rent or sell to someone else, whether that’s physical, virtual, or intellectual is passive income. If it pays dividends, income or royalties without your continued time input, it’s passive income.
Stocks, bonds, reits, personal loans. My personal favorite, mutual funds.
Real estate investing is fairly passive if done right. You can hire others to do most of the hard work for you.
How about writing a book? Once it’s published you get to sit back and collect royalties. Or maybe write an application for a smart phone.
Have a problem? Invent the solution to that problem, and then sell it. Whatever the problem is, chances are many other people have the same problem and will pay for your solution.
Start a business. Hire the right other people to run the business while you sit back and collect the profit. Or sell it and invest the money elsewhere.
All forms of passive income have one thing in common
They all require a ton of upfront work! You have to put in a huge amount of time and effort and research and reflection and probably money in the beginning to set up a truly passive income stream. It takes a lot of work to never have to work again.
You’ll need to learn a lot about whatever methods you choose. Even the easiest example on my list requires hundreds of hours of learning and a lot of cash to create a significant passive income stream.
Anyone can do this
Anyone can do this. It’s just like any other skill – it takes time and work to learn the basics, but if you keep at it you’ll figure out the details. Sure, some people are more naturally talented at this than others and for them this will come faster. Life’s not fair. But everyone can do this if they want to. There is nothing about this idea that is so hard that you can’t do it as well – there is nothing crazy going on here, and it’s not rocket science.
It’s like school – some people are naturally better students than others. But even the lousiest students can get a degree if they try hard enough. Wanting it is the hard part. You have to keep your dream life in the back of your mind.
Let’s take another look at your dream life
You really have to commit to this. It takes a lot of sacrifice in the short term to set up these passive income streams. But remember that you are trading your time now to build an income stream that will pay you forever. Look at the big picture, a little sacrifice now is pretty small in comparison to 40 or 50 years of trading your time for money.
I’ll say it again, you gotta keep that dream life in mind. Sometimes the sacrifices you’ll make will suck. Tough break.
The choice is yours
You can continue to swap your time for money and keep working until old age. It’s the default path most people make. Sadly, many don’t even realise they have a choice in the matter. They unconsciously go about their lives without ever examining their other options.
You are smarter than that I hope.