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Do you really want to work forever? If you do, then how about travel forever or better vacations? The importance of passive income

Posted by on November 14, 2011

Of all the posts I’ve put up, I realize that some people will not be able to nor be accommodating their lifestyles to make a positive change in their lives. I understand that well since most people cannot travel as much as I have in the world. It’s just a fact. But then I realize that there is a golden opportunity here for those who are well-ingrained in whatever field they are in whether for work or pleasure. For example, video game enthusiasts will be able to know which games are popular, from company they are made from, when do they come out, etc. They will be able to profit from this information and gain themselves passive income.

First of all, what is passive income? It can be defined as income that comes from non-primary employment sources such as dividends from company stocks, rental income from real estate properties, royalties from music and/or literature, royalties from an invention or business agreement, etc. They are what you’d call sources of income which do not require much of your time or energy or your employment of work. It pays you even when you are asleep unlike real work where you are paid for the exchange of hours for money.

So back to the video gamer example – Modern Warfare 3 just came out which was one of the most anticipated games of the year (maybe even the decade until 4, 5, and 6 come out). A smart gamer will know the following:

wm3 screenshot with m4, modern warfare 3 call of duty

There are so many additions and functions that can keep someone playing this game for a long time making it a very popular one.

-that this is going to be a popular game, sales probably in the millions

-ratings will undoubtedly be in high, multi-player and its extra cost functions will be extremely popular resulting in more sales and money rolling in

wm3 screenshot with minigun, modern warfare 3 call of duty

Millions of players have already played the multi-player game and continue to do so everyday

-it comes out in November 2011

-it’s made by the company, Activision Blizzard

mw3 campaign screenshot, modern warfare call of duty

If a gamer is smart (and not just playing the game), he/she would look into the investing aspect of it as well.

So what does the smart gamer do? He should look up what the stock ticker of the company, Activision Blizzard (which is ATVI), and see if that company pays a dividend. Long and behold, it does. 17 cents a share (for the year of 2011). He also checks the stock price which is around $13/share (November 2011 price). That’s when he should consider buying the game and probably a bunch of ATVI stocks as well. So for example, he decides to buy 1000 shares at $13/share costing $13,000, however, the stock pays $170/year in dividends. So the gamer would be able to buy the game, Modern Warfare, and get paid for it! All for owning the game company shares! He could also sell the stocks if the shares went up to $15/share resulting in a nice $2000 profit.

Of course, this is all speculation and the stocks could go down in price, the company stops paying dividends, or the company goes out of business. Lots of different factors. But the main point I was trying to get was the passive income aspect of it.

And how does one obtain this so-called passive income? It’s usually earned on one’s spare time, away from primary work time. Most people generally have second careers to develop something on the side in order to earn extra cash such as writing a book, buying and renting out houses/apartments, or conducting research on stocks and bonds in order to earn money off of them by buying/selling and/or dividends. Rich, smart people who do not have to work if they don’t want to are generally pockets deep with passive income streams. Poor people do not have such things (or thinking) and usually spend their money on liabilities where they continue spending money away rather than investing it. This is what you’d call understanding cash flow – you either understand it or you don’t. Rich people make and save more money coming in unlike poor people who spend all of their money coming in or even over-spend it by going into debt.

Rich Dad, Poor Dad author Robert Kiyoski goes well into explaining how and why poor people generally stay poor because of their “poor” decision making while the rich class spend its money on acquiring assets and more assets that will produce money for them. The middle class is a combination of both as this section of the populace will tend to make bad spending habits such as buying houses thinking of them as assets while making good decisions such as acquiring good stocks and bonds. But the end result is that the majority of the middle class will not acquire enough passive income to push itself into the elite class and instead stay generally middle class.

When you acquire enough assets to where you do not have to work at all and still maintain the same level of lifestyle that is when you know that you’ve done well. The fact that you do not have to work if you want to is a huge message to the ego. You can quit or even be laid off and you won’t panic like a lot of people out there who are wondering what to do. Instead, you can go to work for the fact that you want to work instead of needing to go to work for the money.

I say it’s imperative that people invest in themselves by doing some research on how to develop passive income streams so if you are ever caught with your pants down, you won’t be as affected in any negative event. Compare the difference of being laid off but having some passive income come in versus being laid off and not having any passive income come in. By having passive income, you’re still earning money even if it’s not a lot which is a lot better than getting totally cut off and having no income come in at all. You should hedge bets at all costs because ultimately it comes down to this: the only person that will look out for you is you. It’s your responsibility to look out for yourself because the government sure won’t (just look at the facts that social security will be short of funds in 20-30 years and probably cease to exist). The government is not going to worry about you because not to mention all the millions and billions of issues the government has to listen to like budget cuts, your meager complaints about being suddenly unemployed are nothing but a tiny dot on its radar screen.

Maintain the vigilance or play the risky monopoly game where if you do go the route of the status quo, you’re going to also risk standing in line in the unemployment line where millions of others are currently in. Passive income can do a lot of wonders if done correctly where you might even consider retiring if you made enough money or got laid off. You wouldn’t fear the pink slip because it’s merely a cut in money coming in, not a complete stoppage as long as you have passive income coming in.

So even if you don’t have any money issues, just having that extra income stream sure helps a lot because if you have enough passive income, you can stop working, perhaps forever. Or if you have enough money, you will be able to travel to great places of the world as that extra source of money can fund your vacations and not from your regular paycheck. That means a higher quality of life since your vacations will no doubt be that much better – you don’t have to skimp on the little things or worry about spending too much while traveling abroad.