Most of us are living paycheck to paycheck. You work, you spend, and you start over financially every month. It seems like the solution is to get a higher paying job, but a lot of people with higher paying jobs are also living paycheck to paycheck they just spend on a larger scale.
I am so grateful to my friend Usher who told me about the book Rich Dad Poor Dad. The title sounded silly to me but the content was eye opening. Rich Dad Poor Dad taught me that most of us work for money but passive income is money working for you.
Here’s an easy example. I’m saving up for a car that costs $30-40k. If I buy a car I will never see that money again. But if I put that same amount of money into renovating my garage into a studio apartment I could earn 600-1200/mo. Forever. That would more than cover my car payment and I would continue to earn well after it’s paid off. The author Robert Kiyosaki says (I'm paraphrasing)[don’t buy stuff, buy assets that will pay for the stuff]. This was a game changing idea for me. There are so many forms of passive income but here are a few examples: Rent a room in your home, a garage apartment, parking spot if you live in the city, RV or camper, a vehicle or create by writing a book, music, or training course.
The thing that makes it passive is when it takes minimal time & management to earn from your asset on a daily basis. Opening a restaurant wouldn’t be passive because you would be running and managing the business every day. But if you hired other people to manage the restaurant, then it could be passive income.
Something that the book taught me is the potential for growth. I can start with one passive income stream with the means that I have, and with that increase in earning power I can save up to buy another one. Let’s say I earn $800/month from renting my garage apartment. $400 goes toward my car payment and I save $400/mo. In 2 years I could buy a teardrop camper that I rent out for a month at a time. Or in 3-5 years I could buy an empty lot of land to rent out for RV/boat storage. I’m still keeping my regular job to pay for my bills but my overall earning power can keep growing as I invest in sources of passive income.
My favorite thing about building passive income is that it’s a great way to provide for retirement. If I build my portfolio over my lifetime, I can eventually cover all my living costs with passive income, which will be ideal when I retire!
It’s also a beautiful thing on a small scale. One extra income stream can make all the difference for your financial health. I like that many assets protect against inflation. In the case of the garage apartment, as rental costs rise over my lifetime, so will the earning potential for that garage apartment.
I like that I can get more bang for my buck. I still need to go to work but the money I earn can continue to earn when I invest it wisely.
You don’t need a lot of money to start. The author started when he was a kid and had no income. If he can do it with no financial resources, so can you! It takes creativity and it takes risk but there is a lot to gain from shifting your mindset to investing this way.
If this sparks something in you, here are some steps to get started. I recommend reading Rich Dad Poor Dad. It is very educational and inspiring! Then, start saving. Cut some of your monthly expenses, work some extra hours, and put the savings where no one will touch it.
While you wait for the savings to accumulate, get creative and research what type of asset you want to start with. And then come up with a business plan.
Learning about this subject opened my eyes to a very different way of looking at my finances. I hope it helps you. If you want more guidance on how to get started please reach out to me. Both my husband and I would be happy to talk to you more about it and share what we know. You can reach out to us personally or on this website.