If you just looked at all of the blogs and internet personalities out there who talk about financial independence, you’d think that 90% of Americans are on their way to financial independence. I don’t have real stats on this, because I’m not sure that they exist, but the number is probably somewhere closer to 1-5%. The fact is, people have all kinds of grandiose plans about how they are going to thrive financially. But life intervenes, plans don’t work out, and most people end up something less than wealthy. That’s the path of least resistance, and most people follow it. If you don’t want to go the same way, you’ve got to learn and practice different than everybody else. Wealth is, at least partially, a choice, but it’s one that you’ve got to make daily. And one of the best ways to do it is to learn how to make money when you’re not at work.
This is the essence of passive or residual income. You may understand what these concepts mean, but to put them into practice is another story. Many people just read about this stuff and get comforted by a feeling, rather than by making these ideas a reality. So, how do we do this? Well, there are loads of ways. I only have the space to offer up a few suggestions, but you’ll see how these ideas can inspire other ideas. Even if you just put these into practice, you’ll be a lot farther along than most.
Creating Multiple Streams of Income
- Buy Your House. If you can, buy a cheap one, one which won’t require you to pay more than 20% of your income for the mortgage payments. Buying a house is tough. You’ve got to work on your credit, and you’ve got to save up for a down payment. But once you’ve achieved these goals, you can buy the thing. And after that, life gets a whole lot easier. When you pay your mortgage, you are paying yourself, because every payment gets saved as equity. That’s money you’d get to keep if you sold the house. This isn’t really residual income, but I’m just getting started. Once you’ve bought your house and worked your way into a stable financial situation, think about buying another. If you can take on a second mortgage for an investment property, then get someone to rent out the property for more than you pay monthly on the mortgage, you’ll be making real passive income. This process can be replicated as many times as you can handle, each time earning you money that you don’t have to expel much effort to earn. Hire a property management company and make the profit truly passive.
- Hobby Investing. Day trading has been reinvigorated by the Internet. Day trading forms like Forex and CFD trading have found a new generation of users, and you can be among them. CFD, for instance, lets you trade on the value behaviors of different financial products, without actually owning the underlying asset. Your dividends will depend on how much you invest and how well you anticipate value changes. It’s an addictive process, but one which requires a lot of skill. Play it like a game, bank on it like a traditional investment, and you’ll make big dividends in no time.
These are just two methods, but there are many others which are closely related. If you research these, you’ll see how many other residual investment forms are interrelated, and soon you’ll be making money even when you’re not at work.