Live Off Dividends

Passive Income and Personal Finance

You Need Passive Income To Become Wealthy

The average millionaire has seven streams of income, or so “they” say. No one knows who “they” are but this is a concept that is commonly talked about. So what? Well, I’m not sure if this magical seven number is anywhere near accurate but having multiple streams of income is obviously advantageous. Besides, who wants just one stream of income when you can have seven? I’m a firm believer in the power of passive income. The truth is, without it, it’s very difficult to become wealthy in today’s society. A large percentage of the wealthy’s income comes from passive income. Take Warren Buffet for example, he earns about $7,000 per minute from his dividends alone. Per minute!!

Earned Income

There are two ways to get earned income. Either by working for someone who pays you or by running your own business. In other words, income that you actually work for. Earned income is extremely limited by time. You can have multiple earned income streams but you are limited by a 24 hour day and earned income jobs are typically paid by the hour. To earn a decent earned income wage you’re most likely going to need to be full-time somewhere and commit at least 8 hours per day to a single stream of income. This is generally someone’s primary, if not their only stream of income.

Passive Income

Unlike earned income, there are thousands of ways to earn passive income. Passive income is money that you receive with minimal to no work involved. Some popular examples of passive income are owning rental properties, interest, start a website, owning a business, lottery winnings and of course my favorite, income from an investment portfolio. The biggest advantage to passive income streams is that you can be earning income from 10 different streams all at the same time, even while working for your earned income. Passive income is a great way to supplement your regular earned income simply because it’s so hands off and eventually it can even outpace your earned income.

Room For Growth

There’s a good reason why most millionaires have multiple streams of income. Unless you have a very high income or a very high savings rate then achieving millionaire status on a single earned income is nearly impossible. The beauty of passive income is that it generally has a much larger margin for growth. You might get a two or three percent raise at your job each year, which feels great, but chances are it won’t ever amount to enough to make you a millionaire. Things such as stock growth, business growth and appreciation of property can all dramatically increase your net worth. Making it possible for someone with an average earned income to become a millionaire too. In my opinion, creating multiple streams of income, specifically passive income streams, is extremely important to ones financial success. If you could create 3 streams of passive income that earn you an extra $500 per month collectively you would be up  $6,000 per year. If you invested that money for 10 years and earned 6% interest per year that would turn into almost $100,000. That’s a substantial amount of extra money with the possibility of growth and with minimal work involved!

If you haven’t already begun building yourself a passive income stream, what are you waiting for? Get out there and do something that you can look back on in 10 years and thank yourself for!

What is your favorite way to earn passive income?

JOIN OUR NEWSLETTER
Did you enjoy this article? Signup today and receive free updates straight to your inbox.
We hate spam. Your email address will not be sold or shared with anyone else.

10 Comments

  1. Multiple streams of income, especially passive income, is key to reaching financial independence. It also adds diversification as you are not relying on one stream, most likely your day job. I am currently building a small dividend portfolio like yourself. Looking into rental properties hopefully within the next 5 years!

  2. I agree with you. The more income streams the better. But a million is just a number. Once you have a income machine built, it is just a matter of time when you reach the one million goal. Moreover, once you reach a million, you won’t feel any different than when you reach 100k.

  3. I like it! I am always on the lookout for alternative income streams, and this affirms my choices! I’m definitely not getting rich on an electrician’s salary, but it does present me with some interesting possibilities and some great skills.
    Thanks for the article, and I’m excited to see what comes next!

    • Thanks C. DIY! I’m glad you found value in the article. It seems both of us will get rich slowly, much better than not getting rich at all!

  4. I feel as if I’m well on my way to seven streams. In addition to my w2 income, I filed three schedule c’s (business income), one schedule b (interest income), and a schedule d (capital gains) with my US federal tax return. That right there is six streams, and I’ve yet to add real estate to the mix!

Leave a Reply

Your email address will not be published.

*

© 2018 Live Off Dividends

Theme by Anders NorenUp ↑