Like many people, you may have been raised to think the safest way to live in the working world is to have a stable career and steady paycheck. This financial crisis is challenging that framework for many people. Even if you had a stable job, and even if you still have one, by now we’ve all seen how easy it is for that security to disappear overnight.
A sad, yet common, attitude is for us to see money as a scarce resource, and income as something that’s outside of our control. Thinking or talking about money can trigger feelings of guilt and shame in many people.
It doesn’t have to be that way. The truth is, money is a tool that you can access and multiply, independent of anyone else’s permission. And even if you do have anxieties that keep you from seeing how money can be a positive part of your life, that can change.
Consider this: what if you weren’t relying on a check from your boss (or the unemployment office, as the case may be)?
If you have a paycheck, you are converting energy into income – think of this as active income. Active income is not sustainable because at some point you will become unable to work or you may lose your job.
If you have something of value which earns income all on its own, independently from you, you are converting assets into income – think of this as passive income. And passive income is your ticket out of the rat race.
Are you working for your money or is your money working for you? If you don’t already have an emergency fund equal to 3-6 months of expenses, start there. Then pay off your debts (at least your consumer debts – credit cards, car loans, student loans, etc). If you own a home, keeping your mortgage is fine. Otherwise, get out of debt and stay out of debt.
Once you’re out of debt, you’ll be in control of the game and ready to put your energy into building up your assets. The more energy you invest, and the smarter you invest it, the faster you’ll build assets.
Here are three proven ways to turn your energy into assets:
- Work, work, work. Work as much as you can during your day job. Develop a side hustle. Use the money you make from your energy to pay off your debts (debts are keeping you down and beholden to other’s dreams). Once your debts are gone, put money aside and build up your nest egg so you can invest in your legacy.
- Write a book. If you have something of value to share with the world, put it in a book. It’s easier to publish a book now than ever. While it does take a lot of energy to write and publish a successful book, the energy you expend results in more than just a one-time payoff. The asset created (your book) can provide an awesome stream of passive income. And if you can do it once, you can do it multiple times.
- Start a business. Starting and building a business takes an enormous amount of energy. Unfortunately, many entrepreneurs never get past the start-up phase which means they’ve done little more than create an energy-sucking job for themselves. And while there are certainly worse things than working for yourself, if you can go beyond that and create an actual business, you’ll have a valuable asset. Not only will your business provide passive income for you, it will serve more people than it could if it is reliant on you. Once your business outgrows you, it serves you and others so much better.
Once you have assets to invest, here are three proven ways to turn those assets into passive income generating machines:
- Buy a business. You can skip the start-up phase and go right into running a business. What that really means, is that the business runs with or without you. You’ll want processes and procedures in place to run the business and the right people in place to run the processes and procedures. Once a business can function independently of its owner, it begins providing passive income serving its customers more deeply.
- Invest in the market. This is the old compound return game and it works! For example, a 25-year-old who invests just $100 per month in the market and receives an average 8% gain per year would grow their nest egg to over $300,000 by the time they’re 65. That equates to a six-fold gain on the $48,000 they would have invested. And if they can invest $300 a month, their nest egg would grow to nearly $1 million by retirement.
- Invest in income properties. This is my preferred method of generating passive income. It’s completely changed the trajectory of my family’s financial future and it can do it for yours, too. For example, let’s say you buy a half-million-dollar rental property with $100,000 down (financing the rest). If you’ve bought in the right area it won’t take long for that property to appreciate by the $100,000 you’ve got invested. And during that time, you’re colleting rent, too. At just $10,000 per year in cashflow (after your mortgage payment and expenses), you’ve made back your $100,000 in 10 years. If you manage the property yourself, it’s not truly passive income, but it can sure add up quick. And you can roll those profits into a management service or more properties.
Yes, I’m an estate planner. But even more than that, I’m a legacy builder, both for myself and for my clients. I firmly believe we all each in control of determining the legacy we’ll leave. All it takes is putting a plan in place and moving forward with intention.
Dedicated to empowering your family, building your wealth and defining your legacy,