November 18, 2013

Earned income will pay the bills, passive income can make you rich. Why? How?

3 thoughts on “November 18, 2013”

  1. Alex Christianson says:

    Passive income is not hit as hard by Uncle Sam, and the money in the market has a snowball effect called compound interest. As your money makes more money it makes more money that makes more money and so on. So as time goes on it grows and grows and has potential to become very large.

  2. Katherine Graham says:

    Passive income should grow until some day it is more than your earned income, by growing it gradually and effectively. Investing your passive income in no-load index mutual funds will set you free from the working world one day.

  3. Mike Finley says:

    Both answers touched on the value of passive income and why you should stretch to get it. Well done. Let’s recap how it works in the real world for people like me and YOU.

    1. You live below your means by spending less than you earn after taxes are taken out of your paycheck (strive to save 20% of your gross paycheck each month).

    2. Save your money in tax sheltered retirement accounts like a 401(k) and a Roth IRA (strive to place that money in no-load stock index mutual funds whenever possible so you keep most of your returns while avoiding commissions and high fees).

    3. Keep doing it month after month, year after year, and decade after decade (set it up automatically as you pay yourself first when the money comes in, spending what is left rather than the other way around).

    4. Time is your friend as your money starts compounding on itself. (Your money is making money without any physical effort by you. This causes your accounts to grow and grow and grow!)

    5. One day you realize that your monthly and yearly passive income is higher than your earned income (you are free to leave the world of work because you no longer need that money to pay your bills and your lifestyle).

    The value of passive income? You live life on your terms as you chase your passions and your dreams. You are FREE!

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