Passive Income Can Create Wealth?
Passive Income > Earned Income
By: Sean Flanagan
How is income passive? How is income earned?
Think about it …
You get up go to work. Usually right around 40 hours a week, getting paid bi-weekly. YOU TRADE YOUR TIME FOR MONEY. Meaning you work the 80 hours and are owed a paycheck. That is EARNED INCOME. There is nothing wrong with earned income. Everyone starts here. The problem is if you want to create wealth. You cannot create wealth from earned income.
What you would want to do is take your earned income and invest it into assets that produce cash flow, assets like real estate. The real estate I am talking about it is multi-family apartment buildings. This kind of real estate pays when it’s cold outside, it pays when it’s hot outside. You don’t have to work on it for 80 hours.
What I am referring to is passive income. You make the investment into an asset one time and it pays you forever. Passive income is defined as, “Earnings derived from a rental property, limited partnership, or other enterprise in which a person is not actively involved.” Real estate can be that vehicle!
Here are my top three reasons you want your passive income to supersede your earned income.
1.) Passive Income is taxed differently by the IRS. Passive Income is encouraged because of the jobs created by entrepreneurs. As a real estate investor you are providing housing for someone who needs it. The entrepreneur who takes the risk to invest in this asset class is rewarded by the IRS in doing so.
2.) Passive Income proves you have a higher financial IQ. Anyone can go be told what to do by someone else and work for a living. Receiving a paycheck every two weeks comes down to following directions. However creating passive income from assets requires much more and not everyone will do it. A lot of people are afraid to invest or take that “risk” or let alone too lazy to even try.
3.) The third and top reason for me personally, passive income is financial freedom! The freedom to go do what you want with who you want. Not having to ask permission for time off from work being able to enjoy that vacation with your family. Passive income creates those opportunities because of how it is created.
Want to know more about passive income and real estate investing?
Send me an email at invest@jamesonassetmgmt.com
Now stop trading your time for money!