Episode 769: Show Notes
Today, we’re delving into the world of passive income and how to truly build substantial wealth – the kind that leaves a legacy and transforms not only your life but also the lives of your family and future generations. Discover the reality behind passive income and how to create genuine financial security! In this episode, you’ll learn how the magic is in the mix with insights into the best active/passive combinations. I'll also be sharing details about an upcoming workshop that's all about building a real asset – your business – that will fuel your wealth journey. If you're ready to make your business a sustainable income source and gain control over your financial future, this workshop is a must-attend! So tune in for insight into finding the right mix for you, giving you the freedom to live life on your terms.
Debunking the Myth of Passive Income
Today, we're talking about passive income. You know, that sweet concept where money just magically rolls in without all that much effort? Well, I’ve got a reality check for you: passive income may not be as passive as you imagine. We've all fallen for the allure of passive income. I mean, who wouldn't want to create something once and watch the cash flow in forever? I was right there too, believing all the hype, thinking online courses, digital products, and memberships would set me up for life. But the truth is far more complicated.
When you go the route of producing a product once and selling it on repeat, you move from impact and service to marketing, which let me tell you, is a pretty full-on occupation. You can absolutely build a profitable business based on courses and digital products, but it's not necessarily going to build the passive wealth that you're looking for, especially the kind of wealth that's going to allow you to retire early.
Active vs. Passive Assets
There are two kinds of income sources: active and passive assets. Active ones, like businesses or jobs, require our constant involvement. They can be rewarding, but they come with a price – the need for ongoing effort and management. Service-based businesses can give us hefty margins – think 60-80% returns, especially at the start. But maintaining that isn't always easy. Product-based businesses require inventory, which ties up funds. And education-based businesses might have lower margins and demand continuous effort.
On the flip side, passive assets, such as investments like index funds, can generate income without us constantly pushing them. Active assets come with higher rewards in the short term, but they're also riskier. The stock market, for instance, averages about 9.9% returns yearly. On the other hand, passive assets, like index funds, can provide more consistent, long-term wealth generation due to compounding. It's a balance between quick gains and steady growth.
Combining Active and Passive Assets
The magic lies in the mix. Building active assets provides the cash flow you need to fuel passive investments. That business you're running? It's not just about the year-to-year gains; it's about creating a long-term financial plan. So, don't put all your eggs in one basket – balance active income with passive wealth-building. If you’re not looking to work till you're 65 and want to enjoy life while you're still young and kicking, the combination of active and passive assets will stand you in good stead. By creating a balanced strategy, you're setting yourself up for a retirement that's much more than just scraping by.
Remember, there's no one-size-fits-all answer. It's about understanding your goals, the type of income you want, and the lifestyle you're aiming for. Active assets can give you immediate gains, while passive assets offer long-term stability. The key is finding the right mix for you, so you can have the freedom to live life on your terms.
Structured Notes and Passive Investing
I've recently delved into structured notes, and I'm aware that not all financial advisors have access to them. If you need help finding someone who does, I'm more than willing to assist. The intriguing aspect of structured notes is their alignment with the stock market's performance but in a positive manner. Unlike traditional bonds where one goes up and the other goes down, structured notes can rise alongside the market. What's even cooler is the concept of principal protected notes. If the stock market surges one year and then crashes the next, you might be safeguarded against the downturn.
Diversification and Financial Security
Remember, diversification is key. While running a business is an active asset, it's smart to save over time into passive assets to guard against risks. A blend of both active and passive strategies sets the stage for financial stability, giving you the resilience to navigate industry changes without constant financial stress. I’ve personally experienced the strength of diversification and the foundation it builds. Years ago, I was laid off and craved stability – basic necessities without looming worries. That drive pushed me to grasp investing, enough to make informed choices while letting experts handle day-to-day management.
By building an active asset through my business and combining it with passive investments, I've achieved a level of comfort and security that allows me to focus on what I do best. It’s never too late for you to start investing! Just make sure you’re working with a trustworthy professional who can tailor a financial plan to your unique situation. Look for those with a planning background, who put your long-term future first instead of just chasing returns.
