Passive Income Streams - How Important Are They?
In today's difficult economic circumstances it is more important than ever to consider our level of financial education and awareness.
Many of us read the now famous "Rich Dad, Poor Dad" book from best selling author Robert Kiyosaki, and realised that what they had forgotten to teach us at school was how money really works and what we can do to keep it and make it grow.
We spent years learning how to work for money, but we were never told how to make money work for us.
Formal education taught us the skills we would need to find employment and to work for someone else and earn a wage.
Well, what's wrong with that? Well, there isn't anything necessarily wrong, unless that is the only kind of income that you are depending on.
It only takes a financial crisis like the one we are living through to realise that no one's jobs are safe - and that there is no guarantee that the income that any employee depends on will be there forever.
The notion of a secure job has been cast into the realm of make believe by recent events.
So where does this leave us? It leaves us more in need of financial education than probably at any other time in history.
It is vital that we all wake up and realise that we have to have other streams of income if we want to take our first few steps to financial freedom.
It's important here to understand two different types of income: 1) Linear Income: This is money you earn by exchanging your time for money (employment!).
You exchange an hours work for an hours pay, and if you want to earn more money you have to work more hours.
If you depend exclusively on linear income, then your earnings will always be capped by the number of hours you can physically work in a day.
And of course, if they take away your job then there goes your income! 2) Passive (or Residual) income: A passive income on the other hand is an income that comes in month in month out without need for you to exchange your time for that income.
Of course you may need to commit some time initially to set up passive income streams, but once you have then the money should flow in for you with limited or no further effort on your part.
So let's have a think about why passive income is so important and some key elements to remember and consider when you want to make residual income.
Firstly, passive income gives you time freedom.
It means that once you have secured it, you will have an income that will not require you to exchange your time for money.
What can you do with this time? Well, whatever you chose.
You may wish to take part in paid employment to earn more income or you may chose to work on a business or setting up other passive income streams.
You may chose to do nothing.
That's really up to you - the time freedom is the key thing to point out here.
Secondly, is the security that a variety of income streams can afford you.
When you are dependent on just one source of income then you are putting yourself in a very precarious position.
If that stream of income is taken away for you (a redundancy for example) then you could be left struggling to pay for life.
Having a variety of income sources will mean that even if one of them dries up or is removed all together, you still have others that will allow you to maintain your lifestyle.
So how do we go about developing these passive income streams? Well that is where financial education comes in.
It is so important today that we all get the financial education we need to secure our futures.
There are lots of teachers out there and lots of courses, so you would be wise to learn all you can about this topic as your quality of life and your future really does depend on it.
Many of us read the now famous "Rich Dad, Poor Dad" book from best selling author Robert Kiyosaki, and realised that what they had forgotten to teach us at school was how money really works and what we can do to keep it and make it grow.
We spent years learning how to work for money, but we were never told how to make money work for us.
Formal education taught us the skills we would need to find employment and to work for someone else and earn a wage.
Well, what's wrong with that? Well, there isn't anything necessarily wrong, unless that is the only kind of income that you are depending on.
It only takes a financial crisis like the one we are living through to realise that no one's jobs are safe - and that there is no guarantee that the income that any employee depends on will be there forever.
The notion of a secure job has been cast into the realm of make believe by recent events.
So where does this leave us? It leaves us more in need of financial education than probably at any other time in history.
It is vital that we all wake up and realise that we have to have other streams of income if we want to take our first few steps to financial freedom.
It's important here to understand two different types of income: 1) Linear Income: This is money you earn by exchanging your time for money (employment!).
You exchange an hours work for an hours pay, and if you want to earn more money you have to work more hours.
If you depend exclusively on linear income, then your earnings will always be capped by the number of hours you can physically work in a day.
And of course, if they take away your job then there goes your income! 2) Passive (or Residual) income: A passive income on the other hand is an income that comes in month in month out without need for you to exchange your time for that income.
Of course you may need to commit some time initially to set up passive income streams, but once you have then the money should flow in for you with limited or no further effort on your part.
So let's have a think about why passive income is so important and some key elements to remember and consider when you want to make residual income.
Firstly, passive income gives you time freedom.
It means that once you have secured it, you will have an income that will not require you to exchange your time for money.
What can you do with this time? Well, whatever you chose.
You may wish to take part in paid employment to earn more income or you may chose to work on a business or setting up other passive income streams.
You may chose to do nothing.
That's really up to you - the time freedom is the key thing to point out here.
Secondly, is the security that a variety of income streams can afford you.
When you are dependent on just one source of income then you are putting yourself in a very precarious position.
If that stream of income is taken away for you (a redundancy for example) then you could be left struggling to pay for life.
Having a variety of income sources will mean that even if one of them dries up or is removed all together, you still have others that will allow you to maintain your lifestyle.
So how do we go about developing these passive income streams? Well that is where financial education comes in.
It is so important today that we all get the financial education we need to secure our futures.
There are lots of teachers out there and lots of courses, so you would be wise to learn all you can about this topic as your quality of life and your future really does depend on it.
