Day 6: How to Become Your Own Trust Fund Baby!
by Edward Smith
11 Jul 2020
I'm all about working hard to make some extra cash. For me, it's not about achieving a target number or showing off a fancy bank account balance, it's about hitting that sweet spot between day to day safety and personal future fun.
That place where you know your expenses are covered, and that your future self is good to go. Since I'm not a trust fund baby, there is no cavalry on it's way to lighten my load. I have to come up with everything myself. So what do I do to make things easier?
A Warning From A Time Traveler
When it comes to understanding money at a high level, I'm like a prophet. I'm not talking about that stupid overspending problem that I keep mentioning in this blog. I mean when things are working, I've already seen the future, and I know pain is coming my way. My air conditioner is going to break down. My car is going to refuse to start. It's inevitable. Like death and taxes, at the end of the day, you can't avoid these things.
Future events are inevitable and I'll need money to cover all of that stuff. What's worse. These events will keep coming up over and over again, through the rest of my life. I wish there was a way to use what I have right now to help offset the pain and provide some relief. My future self could use some extra help in the form of extra income.
Single Incomes Are Scary for People Allergic To Risk
It was bad enough when I lost my job. Having that second source of income really helped cover unexpected events. Now that I'm a stay at home dad, and the second income is gone, I often think about what would happen if my wife lost her job.
I think we'd figure it out, but the scenario always look scary to me when I look at it. During these moments, I know I would give anything to raise enough money to buy my wife out of bondage to the man.
Write a check, she gets to come home, and she never has to work again, unless she wants to. It would be like a dream come true. She could still do whatever she wants, but we'd be good, whether she makes a dime or comes home empty handed. That's why the idea of passive income looks so attractive.
What is Passive Income?
Passive income is income that you get when you put something into play that generates income on it's own. The cool thing, is once the requirements are met, this thing can keep generating income indefinitely.
It's like an unemployed member of your household suddenly got a job and began bringing in a new paycheck that the family wasn't counting on. Except when it comes to passive income, passive income is better than your family member because passive income never stops working and it has the potential to produce money forever.
Passive income, doesn't get tired, and it doesn't quit. It doesn't care about you or need you. Whether you're healthy, sick, poor, employed, or terminated, passive income continues to work.
It's like you built a robot and the robot does it's job on autopilot without complaining or resting. Even after you become too old to do the work yourself, passive income tells you it's okay to kick your feet up. You can take a break, because the work is still getting done, and the money keeps coming in. You're free man! Enjoy it!
Types of Passive Income
Royalties, patents, investment income, and copyrights are all potential forms of passive income. The more of these you have, the more you stand to gain, and the more stable your future starts to become. Businesses create multiple product lines to reduce risk by targeting different markets.
When they develop a new product, They have no idea what is going to work or whether the new product will even sell. They conduct research and that gives them a pretty good idea about what to expect, but markets are fickle and can be unpredictable.
Passive income works the same way. Passive income is not a sure thing, but the more passive income streams you put into play, the better your chances become of having something work out.
If you build up passive income high enough, you just became your own trust fund baby!
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