The Basics of Creating Wealth – Passive Income

10 Jun

Ray: The Bible says that, “A fool and his gold are soon separated.” That’s very true. All of us have done some foolish things with our money which have caused us to permanently separate from it. I know this because we all make mistakes. So I’ve decided to share a bit of knowledge about the power of wealth and how wealth can be obtained so that you won’t have to repeat the same mistakes again.

I would like to start by defining wealth and the reasons why so many seek to obtain it. Merriam-Webster defines wealth as an “abundance of valuable material possessions or resources.” To the average Joe, wealth usually means the possession of a great sum of money which can eliminate many problems associated with being broke or living from paycheck to paycheck.

But, allow me to introduce a different definition of wealth that many people agree with. Wealth, as I understand it, is being able to maintain a comfortable lifestyle using income that is generated with little or no work. Someone might say that’s obvious because if you were a millionaire then you wouldn’t have to work in order to sustain a comfortable lifestyle. Well, maybe.

I propose that you don’t have to be a millionaire in order to be wealthy. You simply have to have enough passive income to cover your living expenses. Passive Income is income derived from business investments in which the individual is not actively involved. This means that you are generating money whether you work or not.

There are countless ways to develop passive income. One of the more popular ways is to receive rental income from owning real state. You invest your money by purchasing a property and passively receive income from someone you rent it to. People also receive passive income from buying securities and owning businesses. I’ll get into more detail about those things at another time.

For now, it’s just important that you understand the power of passive income because this is probably the biggest component to establishing wealth. Build your understanding of passive income by thinking about different people who receive it as well as the different ways that you can receive it yourself.

While understanding that developing passive income is crucial to establishing wealth, it’s also equally important to understand the danger of passive expenses. Passive Expenses are expenses that derive from purchases or acquisitions that accumulate even when the individual is not actively involved. Common examples of passive expenses are house notes, car payments, cell phone bills, and cable bills. While some passive expenses must be obtained in order to buy investments, you should always be careful to avoid accumulating necessary passive expenses whenever possible. By doing so, you will be able to save and invest more money which will add to your accumulation of wealth.

At the end of the day, your goal is have far more money coming in than the amount of money going out. When your passive income becomes enough to pay for all of your expenses and still still leave you with money to save, then you have created wealth. How wealthy you become depends on how much money you are able to generate.

I read somewhere that Oprah Winfrey collects about 222 checks every month. How many streams of income can you create? Challenge yourself and grow wealthy.

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2 Responses to “The Basics of Creating Wealth – Passive Income”

  1. amylaine June 11, 2008 at 10:47 pm #

    You have a great perspective. You do not have to be a millionaire to be wealthy, it all has to do with what you are comfortable living on.

  2. Emmanuel Makinde August 6, 2010 at 8:06 am #

    I love this message of yours, It is wonderful. I have a site that Earns Me passive Income, CLICK HERE To SignUp Now!

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