How I will create residual income
So I am really serious about creating residual income. The books I've read gave me ideas on how to start. At this point, I decided to focus on three ways to create residual income and passive income streams:
1--> Work on my investment and savings portfolio
2--> Develop a money making blog (not this one... not so far :P)
3--> Investing in real estate
So what do I need to know? Well I guess I need to learn about all of that...
Lessons from Rich Dad Poor Dad
The big lesson to be learned from Rich Dad Poor Dad:
Don’t work hard for money; instead, have money work hard for you.
I have read several bad reviews about Rich Dad Poor Dad... I myself wasn't too much of a fan at first. However, I came to realize that Kiyosaki is a seller, not your personal broker. He gives the concepts, and you take what you like, discard what you don't. You have to be a little bit critical of what you read, and see the feasibility in your situation.
According to Rich Dad (and Poor Dad), there are two main types of income: Earned income, Residual income (including passive income and portfolio income).
Your earned income is what you earn by working. Your job, for example, is an earned income. If you stop working (quit, are let go, etc), you will stop earning that income.
Residual income is what your earn with not direct involvement from you. Of course, you need an initial effort, but once it's going good, it's going, and doesn't stop (usually). A good example of a passive income is income derived from real estate or from your paper assets (bonds, mutual funds,etc). Residual income can be difficult to create, and the key is to be alert for residual income opportunities.
The other main discrepancy between Rich Dad and Poor Dad is that Rich Dad will spend his money on assets while Poor Dad will spend his money on liabilities, without understanding the difference. For example, while a new car is an asset to Poor Dad, that same new car is a liability to Rich Dad. This is the reasoning behind it:
An Asset is something that will pay you back, by producing income.
A Liability is something that will cost you money, by causing expenditures.
So when you buy a new car, what happens? You spend money. Similarly, when you purchase a new house in the suburbs or a new TV, you spend money, by creating a monthly mortgage payment or monthly credit card payments. And as people make more money, they tend to buy more goods and services on credit, increasing the amount of debts.
This is where investing in other types of assets become interesting - the residual income. You need to purchase assets that will create a streaming income. Over time that residual income will become greater than you earned income (job), allowing you to become independently wealthy.
Images from www.web-developer-job.com/rich-dad-poor-dad.htm
Lessons from The 4 hours work week
I started following Tim Ferriss blog after a friend sent me the link.
My first reaction was that Tim Ferriss was way too weird to my taste... I didn't believe that he could be 100% truthful in his blog... How he became a tango professional dancer by hiring a local dancer at a local rate, how he learns any language in 3 months by cutting down on some elements usually taught in school, how he wanted to become an actor and became one... in Hong Kong and mainland China...
The other day, while I was visiting some friend in my hometown, that friend and I got talking about Tim Ferriss. That friend of mine happened to had read his book and to have liked it. That why, the other day, as I was browsing in the bookstore, I remembered about Tim Ferriss book... So I went and found it, found a cozy spot in the bookstore to sit down and started reading the book.
I realized that he was nowhere as crazy in the book as he is the blog. The 4 hours work week book is a bit less cliché than Rich Dad Poor Dad. I did find it more enjoyable to read, because Tim Ferriss demonstrates what he means by his weird own experiences. I still think that Tim Ferriss is a little bit odd, but I came to realize, just like Rich Dad Poor Dad, that The 4 hours work week book is a great book for the big concepts it brings and to get start ideas about becoming independently wealthy and create residual income.
So the big idea of The 4 hours work week revolve around 4 concepts: Define your goal, Eliminate distractions to free up your time, Automate your cash flow, Liberate yourself of the traditional and expected stuff.
To define goals. Basically what do you want? Nothing more nothing less... I guess a question we often don't know the answer. That's why we should take some time one day to decide what we really want (What do I really want??)
To eliminate distractions in order to create free time. In summary, learn to focus focus focus on the 20% most important things, and learn to say no. 20% seems a little bit low to my opinion, but it's the general idea I would like to emphasize: focus on important things, and learn to create free time for yourself.
To automate cash flow, create residual income and outsource. I personally think that Tim Ferriss does emphasize too much on outsourcing, and that he sometimes brings the outsourcing to a ridiculous and even offensive level.
To liberate yourself from the conventional, be different. Tim Ferriss recommend to make changes to your professional life, change your job so you can increase your mobility. Use your time to follow your dreams.
Of course Tim Ferriss book is not for everybody. Many people do not want what Tim Ferriss wants to experience. I know many people who are less than interested in trying weird stuff and living around the globe. I find most people like the cozy idea of staying in their hometown, getting a cute house the suburbs, a good job, getting married, having children and possibly early retire at 58-59.
However this conventional lifestyle I find does not suit me (yet), and this why Rich Dad Poor Dad and The 4 hours week work books are so appealing to me. It has open my eyes to all the possibilities beyond my everyday job.