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We’re going to talk about why passive income is so incredibly important. I want you to think for a second of all the lottery winners that you’ve heard about who after winning millions of dollars are broke just a few years later, or the athletes and/ or celebrities that are making multi-million dollar salaries or paydays and yet are broke by the end of their career.
Why do those people go broke within just a few years of the large payday or their time in the sport end? Why do those people go broke when they are making enough money to last them a lifetime?
The main reason is that they have no financial intelligence. But after that, it’s because they generally don’t have any passive income built up. They often increase their expenses exponentially to match their new income, but they don’t have investments in place to continue paying them after their salaries or income dries up. They are reliant 100% on an active income source. Active income is from a job, salary, or skill set… essentially anything where you are using your skill sets, time, or energy to earn money.
Passive income is income from investments, royalties, dividends, continuity, etc. It is a form of income that comes in every month, quarter, or period of time without having to work for it. Passive income is where financial prosperity lies.
A person can make a ton of money throughout their life, but when they have living expenses that match their income along with taxes, they’re going to find there’s not a whole lot left at the end of the day. Whereas, when that passive income builds up through continuous investing, you can continue getting wealthier every month…for the rest of your lives. That is where the gold is.
Let’s discuss a few reasons why passive income is so important and how it affects us.
#1. Age & Energy. This is an important lesson that my mentor taught me many years ago. He said, “Mark, there’s going to come a time where your energy is not what it is right now. This was about ten years ago, I was in my young 30s and I had no problem whatsoever working twelve hours a day, often working really hard. I remember thinking at that time “well, maybe for you, but not for me”. It didn’t really register because I had a surplus of energy. Now, just ten years later, what he said is starting to come true in my 40s. In another ten years, it’s going to be even more true.
We naturally age, that’s something we cannot stop!! So, if we expect ourselves to rely on an active income source for our lifetime, we’re going to find that as we get into our later years, the 50s, 60s, 70s, we’re going to have a very hard time keeping up. Work is only going to get harder because we will have less energy to do it with. Most people don’t want to keep working in their 60s and certainly in their 70s. They want to retire and live comfortably.
The sad part is very few people can. So the number one reason is age and energy. It’s something we cannot escape…It’s something that’ll hit us all. So, we have to build up our passive income for when that time comes… so we can slow down and enjoy ourselves without worrying about our income. We want to be in a place where we can start relying on that passive income and say, “Okay, it’s time to take a break and slow down.”
# 2. Forward Thinking vs Present Emotional Thinking. Passive income allows us to be forward-thinking and to make logical decisions. If we don’t have passive income and we are always reliant on a new sale or source of income it can cause us to be present thinking and possibly make emotional-based decisions. Generally, when we’re thinking in the present tense, we’re making emotional-based decisions that do not benefit us in the long term and can sometimes hurt us.
As an example, I was just having a conversation talking about how we used to flip a ton of houses…because we had to. We had to flip the houses in order to cover payroll, overhead, as well as meet living expenses. Because of that, we ended up with a huge tax liability, and that ended up becoming an equally huge burden. Whereas, if I had the ability to be forward-thinking and could have focused more on passive income, it would have lessened that tax liability or gotten rid of it altogether.
# 3. Passive Income Relieves Pressure. When we have passive income, also considered continuity it relieves pressure in our lives, finances, and businesses. Once our passive income exceeds our expenses, everything else is extra, which makes it really easy at that point. When we have passive income backing us we are not as dependent on going out for a sale.. or chasing the money; instead, we can be focused on our customer’s needs, making sure we are serving them the best way we can and/ or living out the vision for our lives.
Focus on passive income for these reasons. When you hit the point where your passive income exceeds your living expenses It’s like the clouds open up, and you realize, this is what I should have been doing all along. Unfortunately, they don’t teach us this in school. When your passive income exceeds your expenses, then everything else is a bonus. Any amount of money you make is a bonus and can be reinvested, given away, used… or played with.
What do you do when you hit that point? That’s what we are going to discuss in upcoming videos and blogs. We are going to be focusing on how to start building your finances out so that you can build a passive income that takes care of you, that takes care of life, takes care of your family, and makes life much more enjoyable and controllable.
Hey, thanks for watching! If you would, please go over to marklaneeducation.com and check it out. I should have plenty of free resources for you there to help you on this journey of real estate or your wealth-building, help you become better, more prosperous, more financially free. Check it out, now. Download one of the free resources. I will see you on the inside.
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