Active, passive, and portfolio
1. Active
What Does Active Income Mean?
"Income for which services have been performed. This includes wages, tips, salaries, commissions and income from businesses in which there is material participation."
Active income's rely on you working everyday. Most people do this for 40years.
However in this day and age, the average person will not have 1 job their entire life. If you are laid off or injured your income stops as well. It is dangerous and selfish, to you and your family to rely on 1 active income to provide for all your expenses.
The average length of employment is now under 5 years. So within the next five years statistically you will be out of a job.
What to do?
Now really think about this, Imagine You received a call saying your company you work for has closed down. You lost all your benefits and you will get your last pay check.
1. How long can you survive for with current savings.(You should have a minimum of 3 months salary saved up).
2. Is your resume/CV up to date?
3. How long will it take for you to get another job.(average is now over 20 weeks).
4. Will it be the same pay.
5. Do you have enough training, to get a job quickly over younger more Qualified, applicants?
Now go through all the questions and answer them 1 by 1. Think about them all don't wait until you get a marching orders before you start this. put a plan into place to get where you need to be.
Make a plan to get all the above ready, within 3 months. So if the worst happens you will be well prepared and minimize the loss of equity, savings, lost income. To keep saving, earning and investing to get to your goal which is retiring sooner. A 3 month lay off can put you back 10 years in your retirement plan.
2. Passive
Passive income is income from "trade or business activities in which you do not materially participate."
The more passive income we generate, the less dependent we are on our job.
Passive income does come with a negative side. It Takes time to build up passive incomes it takes a lot of hard work and determination.
There will not be a lot of money at the start but the hard work will pay off.
An example is a business you work hard and long hours, but soon there is enough money to cover expenses, then enough to start making a profit and it starts running on "autopilot". This is the goal for all these passive incomes you are going to learn here and on your own. Work your butt off for a few years,then reap the rewards you build another one.
Eg. Building a website, promote it, work on it keep it updated until it is at a level where you only need to occasionally tweak it.
And it is profitable by selling, advertising, etc.
3. Portfolio
What Does Portfolio Income Mean?
"Income from investments, including dividends, interest, royalties and capital gains."
This one is the best of them all minimum involvement. What is needed is a capital out lay. Eg. you can't just get dividends from shares/stocks. You need to buy a parcel of shares to receive a dividend.
A lot of homework is still needed before any purchase is made. If you want to live off dividends on a certain stock you will need about a 10% return on $500,000 to live on $50,000 per year. So you must look at the average return of a stock, could it go bust in the next year? What if the dividend halves and you income becomes $25,000? It is important to not rely on on any one income.
You want to have multiple income streams.
How about one income from each column?
1 Career $40,000 a year
2. A website bringing in $22,000
3. A $200,000 investment property increasing in value by 10% a year. Year 1 up $20,000 to $220,000
With 5%increase in rent per year. $200 a week up $10 to $210 a week
The average persons looks like this just before retirement.
$50,000 income just about to end
Retirement fund/401k/Superannuation, compounding 10% year and contributions। $300,000
Stock portfolio $30,000 returning $2500 per Year
House. Almost paid off.
Saving account $50,000
Next week we will start talk about the difference and the psychological shift you need to go from employee to self employed .
As Promised, also giving you your first income stream. Which is a learning tool to go from employee, to self employed, to business owner.
Learning about having employees, and leveraging your money. It is an all around developmental system. don't expect to be rich form it straight away though. For most of you though you will make your first penny (1cent) online.
No! Not a million, Not 100,000 a week. But 1 cent. This will put a lot of people off. Which is good, it gets rid of all the get rich quick people and let them go spend their money on pyramid schemes.
You will see how quickly you will start to double your money. We all know how compound interest works.
A little trick people don't understand is. "The quickest way to make a lot of money is to think long term." So join us in this challenge to go from employee to self employed. And earn (for a lot of you) your first $dollar$ on the net. And each week we will be introducing a new income stream. As this first one starts to compound. Don't be deterred you will learn a lot. And make some money while your learning.
Jump on for the ride.
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