Income streams and financial freedom
March 3rd, 2007 by Remon
Passive income is income generated without requiring your direct involvement. One well known passive income stream is income from rental properties. If you own a rental property, it doesn’t require your involvement to make you money. That’s passive income, and that’s what you need to reach true financial freedom.
The beautiful thing of passive income is the fact that it requires no time. You can use that time to set up more passive income streams. Once the income of all passive income streams combined exceeds your spendings, you’re financially free. Unfortunately, most people with jobs don’t have financial freedom as a goal in their life.
If you have a job you’re making someone else money. You wouldn’t be sitting there if you didn’t! Let’s take a random example, say a self-employed person earns $200 a day, but has enough work or clients to make $400 a day but he lacks time. He hires someone for $100 a day and together they make the company $400 a day. The new employee is earning the boss an additional $100 a day while the boss did basically nothing for it. While this is not exactly passive income but leveraged income (making others earn you money) it’s still something you could aim for to reach financial freedom.
The key to passive income is making yourself replaceable. You can setup a business, run it for a while, and when there’s enough money coming in to hire someone and still make a profit for yourself, you can replace yourself with an employee and let him or her do your tasks. You start another business and do it all over again. The same is true on the internet. Say you’re a problogger, you can easily be replaced by others to write the content for your blog while you reap the rewards from the advertising revenues.
If you’re not replaceable in your business, you will never reach true financial freedom. While the earnings may be good, and go up, your direct involvement is always needed. Not only do you not have more time to set up passive income streams, you’re business is also likely to suffer if something happens to you.