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Why your pay cheque might not lead to freedom

We’ve all been there.

Or maybe some of us have and the rest are lucky.

We get a credit notification in our bank accounts and within 48 hrs or less , our bank accounts are back to what it was before we got the notification; just a little cash to get us through the month.

We work hard to get good appraisals and a promotion at work so we can earn higher pay or change jobs to get a better-paying job,

But it seems the responsibilities and bills keep piling up as fast as our income increases.

Month in, month out, the cycle continues and we continue to work ourselves out and daydream about better days or financial freedom

How do we break this cycle?

One of the traps we get into when building a career is to think all we need to do to earn more money is to keep working hard; putting in more time, more effort, more skills and adding hope to the mix.

Sorry to burst your bubble but it doesn’t work that way.

Working hard and trading in your skills to build your career or business is great, but the problem with that career/business plan is it requires your time and effort and once you stop putting in time and effort, you stop earning money.

Let’s define what we earn from jobs, business or contract as Earned Money.

Earned income is generated from working. Any income you earn from a job, your business or consulting is earned income. If it required your time and effort to get paid, then it is earned income.

Earned income is great for day to day expenses, but the downside is it is difficult to earn more income without putting in more hours or learning new skills and you also pay higher taxes as you earn more.

Thankfully, there are 2 other types of income; Portfolio Income and Passive Income

Portfolio income is earned from selling an investment at a higher price than what you paid for it. Think buying stock in the stock market and selling it at a profit or buying real estate and selling it at a profit as well. Paper assets such as treasury bills, mutual funds, bonds, commercial papers are also included in this category. When you purchase a paper asset and liquidate it at the end of its investment tenor, you earn portfolio income.

Beyond paper assets, there are alternative investment options in online crowdfunding platforms such as Farmcrowdy, peer-to-peer lending platforms like Fint or Kiakia that can also help you earn portfolio income.

To generate portfolio income, you need to invest earned income.  You can start with what you have by investing a portion of your earned income regularly and build up over time, however it is important to note that it takes continuous learning and education to continue to invest effectively for portfolio income. You need to stay updated on the markets, the economic situation and how it affects your investment decisions.

This is why investment clubs are great. They keep you accountable and give you the motivation to stay updated and work towards your goals.

The third type of income ,Passive Income, is Bae. With passive income, you only work/invest once and you keep on earning. A simple way to define passive income is to define it as recurring income earned without your continued active participation. Some examples of passive income include: rental income from real estate, income from creating or selling your intellectual property (books, content etc.), network marketing etc.

Passive Income is also a great way to pay an optimized tax rate- Not too high to make you feel you’re at a disadvantage and not too low to make you not feel patriotic.

Bringing it all together, you should earn as much income as you can from trading in your time and effort now and invest a portion of your earned income to build your portfolio income and over time, your passive income as well.  Your passive income plans will support you when your ‘retirement’ plans kick in.

Feel like you need to discuss your income plans, click here to schedule a 15 min complimentary call with me, let’s get started right away. No time like the present!

 

 

 

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