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ARTICLE TITLE: Passive Income explained |  |
08/06/10, 12:41 PM |
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| Author: Sue Hulley for Sewood Articles |
| What is Passive income? Who knows Robert Kiosaki? He is an incredibly well-known, successful financial author who has written a number of best sellers, his most famous being “Rich Dad, Poor Dad.” In this book he explains this cash-flow quadrant where a huge percentage of the world population fall in the left side of the quadrant where we are either work for someone or we own a small business. The rest of people fall on the right side of the quadrant where they have; Investments – that would be things like investing in the financial markets (stock, shares, RA’s), or maybe money invested in a property portfolio. Big Business – the definition of Big Business is where you can leave the business for 6-12 months and it still continues to run and generate income without you. The problem with being on the left side of the quadrant is that it is effort based income where we trade time for money and there are only 24hrs in a day and if you don’t work, you don’t get paid. Whereas on the right-hand side of the quadrant, you are developing assets which generates passive income. What is the definition of an asset? It’s something that makes you money whilst you sleep or are involved in things you really want to be or love doing. In other words Passive Income! IE: Interest in the bank earning money for you Shares in a company that earns you dividends A website that sells something to others 24/7 and is on automatic pilot (all deliveries are handled for you) Robert Kiosaki explains that the left hand side of the quadrant most of the polulation contribute to a minor percentage of the global wealth whereas the right hand side contributes to most of the global money. So which side of the quadrant do you want to be? Hmmmm! Mr Kiosaki explains that the only barrier to people moving across to the right hand side of the quadrant is our own inner strength or determination that enables you to move out of your comfort zone or rut and go and get out there to create some financial options for yourself. So this article shares a few business vehicles that can take us to the right side of the quadrant (where I certainly want to be.) We need a new way to look at our financial lives if we want a change in financial status. Right from birth we watch our parents go to work to earn money to feed, clothe and educated us. And we tend to follow in our parents footsteps as much as this may, or may not, dismay us. We are taught to learn and study hard at school so we can get the best results to advance up the ‘ladder of success’ and get better paying jobs. What if I told you that you do not have to have a top class education to succeed? Look at some of the wealthiest people in business today. Google their education and see how far they got with their education. Some of these wealthy people went ‘back to school’ after they made their money in the first place, once they could afford it! HEY! I am NOT knocking education! Both my children are at school but, in my mind, mostly for the social aspect of learning to get along with others and the discipline. I don’t pressurise them to study hard, just to learn smartly and listen in class when the teachers are there to answer questions. At home, I teach them to think cleverly and start building their passive incomes from an early age so they can focus on doing something they love – cooking for my daughter, and pcs for my son (who insists he will become the next PC game creator genius..). But we do need to work hard and there is no such thing as a ‘get rich quick scheme’ unless it is the lotto you win, most of those are ‘pyramids’ and ‘get rich in a few days without working’ which are scams and you should be very wary of them. To build your passive income requires some sweat work – working hard and using a bit of your precious time in the beginning but what we are doing is working smart because we are setting up Asset Based Income using that time wisely. What are the traditional ways of creating assets? Property, Financial markets (Stocks, shares, RA’s etc), Owning a Business/Franchise Drawbacks of property owning – You either need huge capital to buy a property and straight away earn a residual income or you need a good 20 years or so to pay the property off before you can enjoy the passive income. Plus there are the expenses of owning property – rises in Rates, property value dropping, new geysers, painting, deterioating of roof, etc. Drawbacks of the Financial markets - It requires a long time for you to earn a decent return on investments. And there is also a lot of risk involved if one just has to look at the current economy. No guarantees! Drawbacks of owning a business - There again you need a huge capital outlay and it also comes with a whole lot of risk. Employee wage negotiations, transport problems for stock, getting your name brand known and building a good customer base, etc. Franchises are great because they already have a good name and a great customer base, a proven track record which can be repeated over and over with the same results if you follow the system as they tell you to. What is another way of creating an asset? This method is also based on the franchise principal. What works, use it and repeat it so others can become successful too. It is a successful mixture of Subscription income (people paying for a monthly service), Network Marketing (having levels of people under you that earn passive income for you), Internet product sales (products available on the internet) and Affiliate Networking (people advertising the services for you and earning commission from those adverts.) What is different about the method I am involved in is that it is a legal business registered with the South African Department of Trade and Industry. It is a business that is based on working hard and smartly and you’ll reap the rewards in a few years. If you are interested in seeing this way to create passive income asset on the internet, then contact me and I'll send you the link so you can have a look at this internet asset from the inside. |
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