18 Oct Is Passive Income Really Passive?
Passive income is great at almost any level, but true passive income still needs your continuous education and attention to manage it.
Today I see people preparing to retire with pensions, investments, or mutual fund dividends that they know little about. I do not know anyone who wants to lower their standard of living in the years of life that can be the most rewarding. Yet today’s retirement teaches hands-off money management, settling for a lower standard of living, downsizing your appetite for living, and finding a blue plate special at 4:00 pm. I believe the entire idea of someone else planning and managing your lifestyle for the next 30 years should in itself be retired. This is where financial literacy comes in.
What is Financial Literacy & How Does it Lead to Financial Control
Before age 38 I did not really comprehend the power of passive income and financial control. I was more of a big game hunter, and I let others manage my heavily taxed income. I had a few financial wins, but I also had a few too many losses. Big wins and bigger losses are not a recipe for success. After two separate market collapses hit my balance sheet 45% to the negative, I knew I had to make some real changes.
Having an open mind helped me make these changes. It was at that time that I learned about a concept taught by Robert Kiyosaki: financial literacy with execution equals control. He was not a weekend guru but a person who actually had implemented his own money in exactly what he was teaching. This was someone who was in the trenches executing his passion before he imparted his wisdom and experience to others. The simplicity of it was the power behind it: learning how to manage your money and invest for cash flow by building it once and letting it pay you for years to come. And trust me, no one will manage your money better than you will. No one.
Putting in the Time will Pay Off
Of course, it’s never truly as easy as described. Renters do not pay, there will be a vacancy, quarterly reports must be analyzed, and taxes need to be managed. These are all part of the education process that will provide you with an envious lifestyle. Passive income is not truly passive. It is not a “set it” and “forget it”. You must stay involved and continue to learn. That is far better than reporting to a job or a boss that has the power to eliminate you or your position tomorrow. Either way, you must start and skin your knee a time or two, because the other side of the coin has a bleak future.
Focus on your education while saving to invest, building knowledge, and accumulating income-producing assets. Understand where you can reduce expenses and tax burdens. Leverage the tax system to increase your income. There are thousands of people legally paying less than 15% on their taxes because they understand the tax system through education.
This is not a progression that can be done in a year or two, but over time. The power of starting small and compounding your time, your money, and your education into investments that produce cash flow is very powerful. It turns traditional retirement on its head. It is about a lifestyle of importance, relevance, and value. Do not put this in someone else’s hands.
If you are still working, continue to do so with an understanding that there is a financial goal you need to achieve before you can become your own boss. Set that goal and execute it with laser focus. The day will come where your passive income will exceed your expenses, and then you will be in control. This will ultimately give you that peace of mind that financial independence provides. Finally, I cannot claim ownership for this next quote but it is so true: “Education without execution is just entertainment”.