The Power of Passive Income
One of the first principles taught to Robert Kiyosaki by his Rich Dad was the Cashflow Quadrant®. The quadrant is made up of the four different people who make up the world of business. The first box of the quadrant holds the E’s, or employees. According to Robert’s Rich Dad, these individuals could be identified by their core values, variations of the saying, “I’m looking for a safe and secure job with benefits.” These values can be identified in positions at every level of the company, from the very bottom all the way up to CEO.
Recent years should have illustrated clearly the fallacy of the “safe and secure job,” but that mindset undoubtedly will remain for millions of workers in America. Even if we assume for arguments sake that a person’s job is safe, the fundamental problem that so many individuals have in building wealth is that they simply are earning a paycheck. Individuals in our society often put long and tedious hours into the earning of that paycheck, and usually create a lifestyle to match the earnings of that paycheck. They invest their time into their core value of security, create a lifestyle to match their earnings, and get caught in the proverbial rat race of life.
Perhaps nothing can teach a person this concept more powerfully than the CASHFLOW 101 game. The game quickly exposes the myth that you can create wealth by building assets such as a home or cars. It also teaches you that, through cash flow, you can achieve your dreams, free up your time, and never worry about money again as you escape the rat race forever. This concept of cash flow is perhaps center among the many principles and concepts and taught in this game. The concept of cash flow, or passive income, is also a primary reason why so many people flock to real estate investing.
Looking Forward to Retirement
Many individuals who have core values centered around safety and security undoubtedly have social security and some version of a 401k at the center of their retirement plans. Many individuals in recent years have had to delay their retirement due to fluctuations in the markets, and have been at the mercy of larger financial instruments to dictate how they spend the golden years of their lives. Needless to say, this line of thinking is not in line with the Rich Dad philosophy.
The Rich Dad philosophy teaches that our retirement begins the second we escape the rat race and no longer have to work for money. Retirement in this sense is simply a state of being, as we may choose to continue to work, volunteer our time, spend more time with our families, or simply go surfing every day. The key is that we no longer have to work for a paycheck because our cash flow exceeds our current and long-term expenditures. Thus, our options on how to enjoy and spend our precious time on earth increase tremendously. This is the power of passive income.
Replacing Your Paycheck with Real Estate Income
It is likely that most of us still are in a situation where we are working for our paycheck. Perhaps we are an employee for a company or own a small business; one way or another, we are putting in the hours for the money we bring in. The process of transitioning from earning a paycheck to replacing it with real estate income likely won’t happen overnight, but it will happen if you have the dedication and acquire the how-to knowledge of becoming a successful real estate investor.
Bringing the dedication and willingness to sacrifice will be up to you. No one can find the inner strength or desire for you. Rich Dad Education offers numerous courses that can teach you the how to build passive income through real estate. In addition, over the course of the next several months, this newsletter will be focusing on real estate strategies that are centered specifically on building passive income.
How Long Does It Take to Escape the Rat Race?
There are too many variable to answer this question with a simple answer. If you have ever played the CASHFLOW game, then you know that if you played with four people, one of the four got out of the rat race first while it might have taken other players many extra turns before eventually getting out. There are so many variables in life, and when you couple that with all of the various levels of dedication and skill sets that people bring to the table, it is nearly impossible to calculate. We can take comfort in the fact that numerous people have done it in real estate, and the formula is logical and time-tested.
For example, one of the key principles in real estate investing is buying right. Motivated sellers are the key, and there are many techniques in which you can negotiate buying property for little to no money down in a deal that makes sense for both sides. While this principle is true, negotiation skills can vary from individual to individual, and some people will just have a knack for dealing with people. With all other factors being equal, these individuals will be more likely to escape the rat race first, as they finalize deals at a quicker pace. Fortunately, if you enjoy working with people, are honest, and can learn to communicate clearly, then you will have a heads up in this department.
Real Estate Passive Income
In the November issue of the Rich Dad newsletter, we will discuss rental income dealing with single-family homes, and in December, commercial real estate and apartment buildings. All of these areas are powerful tools to create passive income. For example, if you own 20 units that generate an average of $200 per month of positive cash flow, that would create $48,000 in annual net cash-flow. It is easier than you think to get to this point. Next month’s article will contain a step-by-step guide on how to get to this point.
$48,000 annually may not seem like the answer to make all of your dreams come true. However, I dare say that it is far more passive income that you currently enjoy. It could also serve as the foundation to escape that rat race so you could devote extra time to building additional cash flow and true wealth. Whatever you do at that point would be your decision, which is the point we all want to reach in our quest to escape the rate race.
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