In a word, YES! Seriously I saw this question in a Facebook group… I kid you not.
If only trading was that simple to answer, then everyone could make millions.
When it comes to Passive Income, even the term brings great divides… If you Google the term Passive Income, there are literally hundreds of different forms of passive Income on one side.
Then on the other side, there are literally hundreds of posts de-bunking them of even being passive.
So, What is the real skinny on passive Income, and why is it essential for me to clear it up for you?
Defining Passive Income
Those of you who are regular readers of my posts will know only too well that I don’t go for who’s right and who’s wrong. As it is a complete waste of energy.
It all depends on our very own perspective. What is right for me may well be wrong for you. Makes me right for me, and you right for you.
Meaning I’m not going to sit here and tell you who to believe or who’s right and who’s wrong. Quite simply, I don’t care… I like my life simple.
I will, however, tell you what my definition of passive Income is and why that works for me. Because when somebody defines something to you, they are giving you their belief on the subject matter.
You then need to decide for yourself if their definition is helpful to you. Because really, that is all that matters. And if you don’t like all the definitions being bandied about by the so-called experts… you can create your own definition.
This is precisely what I did, I created my own definition, and it suits me fine. And if you like it and find it useful, then you can use it too.
“Passive Income is income generated by sources other than myself or Income that I generate using less than 4hrs of my time each week.”
Please don’t quote Wikipedia or other reputable sources telling me I’m wrong… because I won’t argue with you. It’s my definition, and I find it very useful to me.
Why is Passive Income getting a bad rep?
Its generally being overused in the marketing world. Marketers and advertisers know that people like the idea of passive Income, so they sell their wares as passive.
When the majority of the time, it is far from passive.
“Start a business and earn passively!” seriously, as someone who has started a business, I can tell you with hand on heart… it’s a lot more work than a 9-5, so it can’t be passive.
“Earn a passive income as an affiliate marketer!” duh, affiliate marketing takes a lot of time and effort… how on earth can that be passive?
“Become a Forex Trader and earn passive income!” yup, individuals and companies are selling becoming a forex trader as an easy way to make passive Income…
Possibly if you have a rich grandfather or someone who can invest a million with you. And you’d need a near-perfect trading (and investing as they are the same) mindset.
Not many traders get to make it passive for themselves…
But some of us do offer our services so that it can be a passive income for others.
The benefits of Passive Income
- Money has no time constraints – I come from a very blue-collar background where being a tradesman was a sign of achievement. By becoming an Electrician, I made my parents proud. There are, however, limitations to being a tradesman as with most employee jobs, TIME. If you are paid by the hour and can only work so many hours a day, there is a limit to the amount of money you can earn. This, in my mind, is no different than being a slave, our new master being money. Money tells us when to wake, go to work, when to have lunch and when we can go home…
- Take the pressure off yourself – When striving out on your own to become a trader and you need your profits to pay the bills. That is an added pressure that can play havoc with our emotions and, in turn, your trading. Trading with your own money is stressful. We’ve covered that in previous posts. But now you add to that pressure with the thoughts in your head about paying the bills and putting food on the table. It can and does break many traders. Stressed out traders are one mistake from either going broke or quitting.
- More time for you – If your passive income exceeds your expenses… which, by the way, is my definition of Financial Freedom… Then you have more time for yourself and your family.
- Enjoy the finer things in life – You may really enjoy your job although you may not earn enough to be able to indulge yourself. Passive Income as an additional income can make all the difference to your happiness in life.
- More Assets and fewer Liabilities – As described by Robert Kiyosaki, the core difference between the rich and the poor is their purchases. The poor tend to buy liabilities when they get money, whereas the rich buy assets. Liabilities continue to cost you money, unlike assets that can earn you money as Passive Income. Assets can be passed on to loved one’s as well. Added bonus.
- Secondary Income – Some people like to live on the limit. Or perhaps they don’t, but they always seem to find themselves on their income limits, even after several pay rises. But if they spend more money on assets rather than the next shiny new object. They will have a secondary income that perhaps keeps them away from the precipice of disaster.
Remember, I like things easy, not correct in everyone else’s eyes. So, if you buy into an Investment, it is an asset. If you buy gold and hide it under the floorboards, it is an asset.
If you trade the market, your Capital, in my opinion, is an asset. A house you rent is an asset, whereas the home you live in is a liability until it is fully paid for.
Art, sculptures, and antiques are assets that can be used for passive income in the future. Write a book or a music score, and your royalties can be classed as passive as long as you spend less than 4 hours a week promoting them. These are assets. They make you money.
Unless you are an author or a musician, then royalties are your active income, not passive.
And let’s not ignore the liabilities, for this is most peoples downfall. It is why they will never be rich.
Some people you presume to be rich because they have a big house, and the flash cars are not because of liabilities. That house and those cars, for starters… are liabilities. The latest gadget, the newest phone, the up to date PC, gaming console, running shoes, designer clothes are all liabilities.
Yes, I know real rich people own all of this stuff. The difference, assets paid for it all…let that sink in. They pay for liabilities with their passive income because it doesn’t cost them any of their time.
And time, my friends, is the most essential commodity of them all. Because we all have the same amount. Every day. Doesn’t matter how rich or how poor you are. Every day you have 24hrs, 1440 minutes. The difference between people is how you spend them.
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