- 1 WHAT IS THE PASSIVE INCOME LIFESTYLE?
- 2 PASSIVE INCOME A BASIC LIFE NECESSITY
- 3 WHAT’S THE GOAL OF THE PASSIVE INCOME LIFESTYLE?
- 4 EASY TO DO…BUT ALSO EASY TO NOT DO
- 5 LEVELS OF PASSIVE INCOME AND FINANCIAL GROWTH
- 6 FOCUS ON INCREASING PASSIVE INCOME STREAMS AND STRENGTH
- 7 CALCULATE HOW MUCH PASSIVE INCOME YOU NEED MONTHLY
- 8 PRACTICAL WAYS TO BUILD, ACCELERATE ACHIEVE YOUR PASSIVE INCOME LIFESTYLE
- 8.1 #1 Find A Stable Job + Keep Your Day Job (Don’t Quit Your Day Job)
- 8.2 #2: Aggressive Cut Out Unnecessary Costs + Keep Costs Ruthlessly Low
- 8.3 #3: The Grind OUTSIDE The 9-5
- 8.4 #4 My Conclusion To Accelerate The Passive Income Lifestyle = Online Business
- 8.5 #5 Invest regularly into dividend and income stocks
- 9 EXAMPLE OF THE PASSIVE INCOME LIFESTYLE FUNDAMENTALS
- 10 THE SIX RULES OF THE PASSIVE INCOME LIFESTYLE
WHAT IS THE PASSIVE INCOME LIFESTYLE?
The Passive Income Lifestyle is a term I coined many years ago, and it’s not rocket science. Basically it’s creating multiple streams of passive income that’s more than your expenses…and that’s it really.
Generally, do more of what works, and do less of what don’t work.
I have written quite a bit on passive income, passive income lifestyle and FIRE (financial independence, retire early):
- Start Your Financial Independence Retire Early Adventure
- Passive Income Lifestyle Manifesto
- Passive Income Lifestyle 101
- How To Retire Early
- How To Retire Early In Singapore (Or Wherever You Are)
- Ultimate Passive Income Blueprint
- Entire Simplified Framework of Passive Income Lifestyle
- Acquire and/or build passive income machines only
- Why You Need To Retire Early
- The Power To Get Wealth
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.
WHAT’S THE GOAL OF THE PASSIVE INCOME LIFESTYLE?
Let me show this to you:
Your goal is to create and accumulate Passive Income Machines that brings you streams of passive income, and your monthly passive income streams needs to be more than your monthly living expenses and costs.
That is the basic goal of the Passive Income Lifestyle.
Once you’ve reached there, you have more breathing space and thinking space. You have more options. Maybe you want to focus on the other Life Priorities.
Maybe it’s to spend time with loved ones.
Maybe it’s to travel.
Maybe you’d want to earn more.
Maybe you’d want to teach and help others to exit the rat race too.
Whatever it is, the crux of it is to free you from your old ways of being a wage slave, of being chained to something that isn’t as important as discovering your Life Purpose and Mission, or at least just live life on your own terms, enjoy your own lifestyle and choose what kind of work or things you want to do in your life.
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.
LEVELS OF PASSIVE INCOME AND FINANCIAL GROWTH
There are different levels of financial well being and stability, and for reference:
- Level -1: Where you have debt and no predictable income
- Level 0: Where you don’t have debt and no predictable income
- Level 1: Financial Stability where you have predictable active income
- Level 2: Debt Free from all loans, debts and mortgages and predictable income
- Level 3: Financial Security where your passive income streams is equal to your basic living expenses
- Level 4: Financial Independence where your passive income streams is more than your basic living expenses
- Level 5: 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 6: Financial Abundance & Wealth, where your passive income streams are much more than what you need for financial freedom; and have generational wealth.
FOCUS ON INCREASING PASSIVE INCOME STREAMS AND STRENGTH
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)
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 2. 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, and aim for at least Level 3 where you passive income streams is equal to your basic living expenses.
With that, you’d be at least financially secure and free, able to choose the lifestyle and work you want to do.
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.
PRACTICAL WAYS TO BUILD, ACCELERATE ACHIEVE YOUR PASSIVE INCOME LIFESTYLE
I’ve experimented with a lot of solutions, and I found that the best way to sustainably build and accelerate reaching The Passive Income Lifestyle comprises of a few core basic fundamentals:
#1 Find A Stable Job + Keep Your Day Job (Don’t Quit Your Day Job)
It’s very hard to start one’s passive income journey if one cannot put food on the table or pay for basic things like rent, water, toilet etc. Moreso if one has dependents like spouse/partner and children or pets. Without a basic income, even things like health, healthcare and wellness can be hard.
Even things like mental health, alertness, clarity etc can be compromised.
So, if you don’t have a job yet, get one. I don’t care if it’s a mundance 9-5, but go get one and keep it, and keep yourself and your dependents safe, fed and have a shelter. If you already have a day job, good. Keep it first for regular income.
That’s the 9-5 right.
Just survive first and have some semblance of normalcy and income.
#2: Aggressive Cut Out Unnecessary Costs + Keep Costs Ruthlessly Low
And the main reason to this…so you can save as much as possible.
At this stage, I don’t want to hear that one “needs to have luxuries” or something along that line. Look, I don’t abhor luxury spending, but I dislike mindless, stupid spending ie spending on things you don’t care about. Or spending to fit in or spending to impress people I don’t give two shits about – nope.
Let’s FIRST make much more money too, online and from dividends, then you can buy and spend on stuff you care about – then, we can budget for them, spend and enjoy them please, 100% guilt free.
Buying something “just because someone you know has it” – yeah sure it may seem interesting, but if you’re not gonna use it, don’t waste money on stuff that you don’t care about because every dollar you saved and set aside…
Split your savings into 5 groups, 20% each
- 20% untouchable saving for rainy days and urgent, life saving stuff.
- 20% into dividend stocks to slowly build your dividend income from a portfolio of dividend and income stocks (as well as cryptocurrency if you like)
- 25% to spend on whatever your basic necessities are.
- 5% to splurge on whatever you want, guilt-free
- 20% into investing into yourself, like going for seminars and courses, or buying books to make yourself better
- 10% remaining into investing into improving yourself, like buying books or courses or seminars to learn a specific skill or upgrade yourself.
From #6, I highly recommend to learn, experience and improve either (See point #3 and #4)
- 6.1 a highly paid skill such as high ticket sales OR
- 6.2 building an online business on the side which can really scale due to it being technology based. This will help you accelerate your passive income lifestyle as there is no cap on how much you can earn. <<<< This is my #1 recommendation for you to achieve The Passive Income Lifestyle
#3: The Grind OUTSIDE The 9-5
Remember I shared in point #1 which is to keep your 9-5 day job? And if you managed to keep your costs low and save some of your income aside, here comes the point to level up your income:
The Grind Outside Your 9-5
So yes, whilst you have to work from 9 AM to 5 or 6 PM, next is to take some of your savings aside and then grind and hustle:
- your weekdays 8 PM to 2 AM and
- your weekends
#4 My Conclusion To Accelerate The Passive Income Lifestyle = Online Business
So your 9-5 is to ensure you and your dependents have food and shelter and some decent human well being stuff done….BUT your grind outside the 9-5 is where you get rich and build all your streams of passive income OR learn a high income skill.
As mentioned earlier, I highly, highly recommend learning how to build an online business simply because there are so many plus points to it:
- Low Barrier To Enter: It’s cheap and affordable to start (we’re talking a few hundred dollars unlike physical businesses where we’d need typically 5-6 figures to start)
- Global: It’s not limited to any particular location or geography – you can start and run a profitable online business and run it globally eg you can be based in Thailand or an island (with internet of course), and sell to a global audience in United States, Singapore, United Kingdom, Canada – wherever you want
- Life-long Skill: it’s a skill that you can use for life – yep, you can use the same skill to start a complementary online business to the first one
- Highly Scalable: it’s scalable and especially cheap to scale, because you leverage technology
- Works On Autopilot…As You Sleep: I know this sounds scammy, but frankly, because it’s technology, your online business will work 24/7 and every single sales page is your sales team that works 365 days a year, 24 hour a day, 7 days a week for you, day-in-day-out
Another strong reason why I advocate to learn how to build a profitable online business is because we cannot save money into becoming wealthy. The reason why this is the case is because we can only save on how much we make, ie if we make $2000, at best, we can only save a percentage on $2000 – be it 5% or 50%. However, with an online business, when we nurture it well, it can make $500 a month, $1000 a month or more – this will be a marked difference between “saving” and starting an online business.
Learn how to make money your first $100 online with me by going to Passive Income Internet Business: Make Money Online.
Learning, applying and doing this well will change your life for significantly. An example is I used to earn $2000 per month as a therapist in a large public hospital – I wasn’t gonna waste time trying to win the game of petty healthcare politics and spending tens of thousands of dollars and maybe get an additional 3-5 years bond to “just” increase my salary by a few hundred a month.
Instead, I decided to be an entrepreneur, where I knew there is no limits, but I went ahead and learnt the hard way, and got cheated, learnt many business, leadership and entrepreneurship lessons – all these lessons, I take them as investments to improve myself.
My results at a glance:
- 2007 – my take home pay per month as employee was $1700 (gross $2000)
- 2008 – my 1st month as freelancer was $4800
- 2010 – dividends as business owner was $30000 per year
- 2013 – $100K dividends per year
- 2014 – business acquired for 7-figures
- 2017 – exited the acquired business because my work was complete there, ready for next phase
- 2018 – started my 18 months sabbatical away from therapy business and focused on online business and publishing
- 2019 – invited to my wife’s physiotherapy business and turned it around from multiple setbacks to strong-accelerated growth business
- 2020 – multiple businesses, multiple online assets, growing therapy business, creating sustainable growth and and more – it’d more than like 100X from here
I’m having a ball of a time right now, and I won’t have this if I stuck to my $2000 a month job. Sure, I may have some raises along the way, but oh boy – it started with a dream and desire.
Come, grow with me by learning how to make your first $100 online.
#5 Invest regularly into dividend and income stocks
Of the savings from your day job and your increasing online income and commissions, invest regularly into dividend and income stocks. In fact, one of my very favorite passive income is truly dividend income, because
- It’s the truly and only real passive income – in Singapore, all dividends are banked straight into my bank account
- In Singapore, dividends are totally tax free
- It’s liquid: I can sell the dividend and income stocks as and when I want (though I prefer to hold and reinvest dividends into buying more dividend stocks)
- I can diversify my dividend stocks across multiple sectors such as hospitality, real estate, health care, food and beverage, etc
EXAMPLE OF THE PASSIVE INCOME LIFESTYLE FUNDAMENTALS
An example is say you make $2000 per month.
Minus Core Expenses (expenses that you 100% cannot live without), such as
Minus Secondary Expenses You Use But Can Control Costs
- Mobile contract (save $20 on Circle Life telco subscription here if you’re in Singapore)
- Internet contract
Last of this is Luxury Expenses such as
- Short and long distance travels
- Buying/changing cars, phones, accessories
- Fine dining
Let’s say you have a balance of $1000 – break this into 5 equal groups of $200 each.
- First $200 goes straight into your bank account. Ideally to an account where you don’t have a bank card, or credit card or whatever, and it’s inconvenient for you to take it out. Ideally you have to go all the way to the bank to draw out this money so it’d be only when it’s an emergency.
- Second $200 is for you to spend. As you like. Maybe you can break it into 4 weeks x $50 where you can splurge once a week up to $50 for four weeks. Or you can use it once off on an item you’ve been wanting to buy – whatever works for you.
- Third $200, plonk it into your dividend stock account and/or crypto account. If you’re in Singapore, you can use Lim&Tan (sign up and we’d both get some vouchers).
- If you’re interested in investing in cryptocurrency, look at Crypto.com (if you sign up under my link, you and I both will get USD 50) Crypto.com’s App + Debit Card (use my Crypto.com code n9h6j72gs4 and we both get USD 50)
- Fourth $200 you can use to buy books, seminars, training and enrichment courses that will improve your ability to earn money, improve your quality of life or health eg massage. You can also use it to learn how to build an online business with Wealthy Affiliate or Solo Build It.
- The final and last $200 goes into investing into building a business you like and care about. Of course, as mentioned above, I highly recommend learning and building an online business or publishing business on the side of your career or job – it is a highly paid skill that can help you accelerate your passive income lifestyle as there is no cap on how much you can earn.
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.
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.
- 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
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.
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”.
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.
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.
RULE #6 OF THE PASSIVE INCOME LIFESTYLE: Keep Learning, Growing & Giving Back. And Choose Good.
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.
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.
See the Tools & Resources I use to improve my life, businesses, health, build passive income and more.
Take action TODAY: One year from today, you’ll be one year older. What would you have done by then?