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PASSIVE INCOME A BASIC LIFE NECESSITY
Ever since I read Robert Kiyosaki’s Rich Dad Poor Dad, which opened up my eyes to the world of positive recurring cashflow via rental properties and business in 2002 (when I was 20 years old), I’ve been on a ever-learning and growing journey on learning how to create multiple streams of passive income.
…and I’ve concluded that The Passive Income Lifestyle is 100% required “unlock the next stage of our lives”, which is to be able to achieve our highest sense of self and fulfillment. It’s part of an “achievement” and by itself, it can be amazing when one has more passive income than expenses (which means that one is financially secure or free).
It is really hard to level up when we can just live hands-to-mouth and barely surviving. If that’s you, then all the more pay more attention, focus and energy on this section, and
keep learning, applying and improving in increasing the number of passive income machines that generates commissions, interest, income, dividends and royalties passively and that is recurring in your life. That’s the general #3 rule of The Passive Income Lifestyle.
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EASY TO DO…BUT ALSO EASY TO NOT DO
To achieve a fully passive income lifestyle is easy and not easy at the same time, because it requires a lot of discipline, focus and dedication, and it can be really boring after a while. But that’s truly the point of the passive income lifestyle, so that one doesn’t get too bogged down in “just” surviving, paying the bills and putting food on the table.
That’s what I mean by “unlocking” the next stage of our lives. Too many of us are too busy with the not important things, like being busy being busy, and there may be more pressing and important things (which differs from people to people).
But do it.
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FOCUS ON INCREASING PASSIVE INCOME
In July 2020, I have concluded that I will pay more attention and time dedicated to earning more, in my offline businesses and online / internet businesses, and then focus on scale and automation/delegation, to free up time. From the surplus I will take
- a portion out to reinvest into the business
- a portion out to invest into dividend stocks and cryptocurrency
- a portion to enjoy and spend, guilt free
The reason for this is really simple:
I will spend my conscious and active efforts, hours and energies on increasing my offline and online / internet income, using the skills I have. From my assessment, 95% of my working hours should be dedicated to business growth, scaling and delegation. The remaining 5% will be used to spend time on any passive income investing activities.
No point spending time doing things that I am not skilled or interested in (though I do spend money to research and improve my skills such as internet business courses)
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LEVELS OF PASSIVE INCOME AND FINANCIAL GROWTH
- Level 0: Financial Stability where you have predictable active income
- Level 1: Debt Free from all loans, debts and mortgages
- Level 2: Financial Security where your passive income streams is equal to your basic living expenses
- Level 3: Financial Independence where your passive income streams is more than your basic living expenses
- Level 4: Financial Freedom where your passive income streams allows for freedom and pursuit of some/more of your life goals and priorities; have savings up to last 5-10 years
- Level 5: Financial Abundance & Wealth, where your passive income streams are much more than what you need for financial freedom; and have generational wealth.
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CALCULATE HOW MUCH PASSIVE INCOME YOU NEED MONTHLY
This is linked to the above levels, and many people are usually “okay and even happy” if they can achieve level 3 and 4. Here in NigelChua.com, I’d like you to keep leveling up to as high level as possible without sacrificing your happiness, morality, ethics at all.
Most people would be “okay enough” to achieve have an additional $1000-2000 per month passively, but really think and ponder.
How much or little is required for you to reach the life you will dream about? Is it $3000 per month passively? Or $5000 would provide more wiggle room and allowance to travel and be prepared.
This is a exercise on goal and thought process, so
- calculate how much debt you have right now AND how much you’re spending monthly now (this will determine how much you need to reach level 2
- next, determine how much passive income you’d need to reach levels 3 and 4 or 5
Next, onto the passive income machinations that will get you to build and live YOUR Passive Income Lifestyle.
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THE SIX RULES OF THE PASSIVE INCOME LIFESTYLE
RULE #1 OF THE PASSIVE INCOME LIFESTYLE:
Earn More & As Much As You Can
This applies to anyone who is earning active income, be it as freelancers or employees, full time or part time. Choose work that you do enjoy, and that pays you well enough that you can save at least 20-50% of your take home.
It’s OK if you have to start low or somewhere, just start and don’t stop. Everyone starts somewhere, some low, some middle and some high – just focus on your own journey, and survive first.
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RULE #2 OF THE PASSIVE INCOME LIFESTYLE:
Keep Your Costs As Low As Possible; Avoid Liabilities & Luxuries For Now
Next is to keep your costs and expenses as low as possible, avoiding unnecessary liabilities and luxuries for now. Buy second hand or the middle tier ones for now. Anything you need to buy, use them for as long as possible.
Such as
- not buying the top of the line phone / car / laptop / watch / bags / gadget / home etc
- not subscribing to monthly top tier of internet services / mobile services / cable TV etc
- not buying top-of-the-line clothing, wearables etc
- not taking the most expensive travel destinations / travel vehicles / etc
- etc
Basically, do not quickly subscribe to things that take money out of your bank account. If need be, choose the lower or middle tier one and save the difference.
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RULE #3 OF THE PASSIVE INCOME LIFESTYLE:
Build And Acquire As Many Passive Income Machines (aka Assets) You Can
Here is where the game becomes a little more fun. Say you can save 15-50% or more of your take home income, after taxes.
Then take these savings and then learn how to build or acquire Passive Income Machines (also known as passive recurring assets) that puts money and income into your pockets and bank accounts in a recurring and passively.
- invest a small portion into learning a skill to make money online
- invest the remaining majority into dividend stocks such as REITs, index funds that will pay you back anything from 2-10% per year
Trivia: Why “Passive Income Machines”? Why not call them assets?
I purposely chose the term “passive income machines” even though they are also assets, is because there are some accounting and finance terminology that can be misleading out there. A Passive Income Machine IS ALWAYS an asset, but not all assets are passive income machines.
There is a distinct difference.
In the world of accounts, any larger purchases such as homes are often termed as “assets”. But this clashes with MY definition of assets, because to me, assets MUST put money in my pocket. And many homes, houses and buildings unfortunately do not put money in the pockets of the owners, instead, they behave like liabilities (simply because they’re homes or owner-occupied, which is good on its own, but it wouldn’t add to your passive income bottomline, unfortunately).
Also, I like the term “machines” because I want my businesses and investments to work clockwork, like machines and robots, to add value to our clients and customers, and work hard to earn me and the business more income.
Hence the term, “Passive Income Machines”.
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RULE #4 OF THE PASSIVE INCOME LIFESTYLE:
Reinvest Majority Of Passive Income From Passive Income Machines Back Into Passive Income Machines First
Here’s where the Passive Income Lifestyle game gets a little more fun: you will start to get more and more passive income, such as
- commissions from online businesses
- royalties from ebook sales
- dividends from dividend stocks and cryptocurrency
But they are budding amounts and streams, and it’s unlikely you’d fire your boss anytime now. It
At this point, I typically recommend to reinvest at least 50% or more (up to 75-80%) of all these passive income back into the same vehicle. To illustrate
- take at least 50% of all commissions from online businesses and reinvest into online businesses
- take at least 50% of all royalties from ebook sales and reinvest into ebooks
- take at least 50% of all dividends from dividend stocks and cryptocurrency and reinvest into dividend stocks and cryptocurrency
The remaining surplus 20-50%?
Spend it, enjoy it, on whatever you want, 100% guilt free. give it to a charity of choice, or a loved one. Or someone who needs it. Or reinvest it. Whatever rocks your boat.
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RULE #5 OF THE PASSIVE INCOME LIFESTYLE:
Passive Income Machines Pay For Liabilities, Lifestyle & Luxuries
In that order above Level 1 Financial Security-level passive income. Depending on how much passive income streams you have coming in, your passive incomes should be prioritized into different tiers of “allowance”. To give an example:
- Level 0: Financial Stability where you have predictable active income
- Level 1: Debt Free from all loans, debts and mortgages
- Assuming amount to reach this is $3000/month passively – Level 2: Financial Security where your passive income streams is equal to your basic living expenses
- Assuming amount to reach this is $4000/month passively – Level 3: Financial Independence where your passive income streams is more than your basic living expenses; and have savings 1-3 years.
- Assuming amount to reach this is $5000/month passively – Level 4: Financial Freedom where your passive income streams allows for freedom and pursuit of some/more of your life goals and priorities; have savings up to last 5-10 years
- Assuming amount to reach this is $10000/month passively – Level 5: Financial Abundance & Wealth, where your passive income streams are much more than what you need for financial freedom; and have generational wealth.
So if you achieve $3000/month passive income, that’d mean you have reached level 2 of financial security, and that’s pretty straightforward.
If you achieve $4000/month passive income and saved 1-3 years worth of living expenses, that’d mean you have reached level 3 of financial independence.
And so on and so forth.
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RULE #6 OF THE PASSIVE INCOME LIFESTYLE: Keep Learning, Growing & Giving Back. And Choose Good.
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Here at this stage, you are going in the right direction of increasing your passive income streams and increasing the quality and quantity of your passive income machines.
Good.
Keep learning, keep applying and keep growing, and start to give back where it matters to you. It may be teaching others how to build their streams of passive income, or it could mean spending time with loved ones. Or quit your job. Or work for fun. Or volunteer. Your call.
Most importantly, do not sellout your good ethics, practices and values in pursuit of The Passive Income Lifestyle. Do good, live good, be good.
I wish you all the best, my friends.
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