Wednesday, June 07, 2006


So You Want to be Rich (Part Two)

Yesterday we looked at a principle called Leverage. We learned that people who use leverage could get richer than those who don’t.

Today we’re going to learn about another concept. This one has to do with what type of money you are earning.

Essentially, there are two types of incomes you can earn. They are Active Income and Passive Income.

Active Income is money you get for doing something. It’s much like non-leveraged income. You work and hour, you get paid for an hour. Like we’ve already discussed, this type of income is very limited because you only have so many hours in a week.

Passive Income is money you earn today from something you’ve done in the past. This is also called residual income. You might be asking “How can I get paid today for something I’ve done a year ago?”

Think about Elvis Presley. He made a lot of money this year even though he’s been dead for some time. He (or his family) gets a small percentage of money from all his record, CD, and Tape sales. He made the original recordings decades ago.

Now, I know you’re sitting there thinking “Great. I can’t do what he did. He was a rock star!” This may be true, but the idea is to start thinking in these terms. In the next article you will learn about different ways of generating passive income that you or anybody could do. The good news is you live in a time where this type of income has never been easier to make. In fact it’s a heck of a lot easier for you than it was for Elvis! There are a lot of average Joes living some pretty amazing lifestyles and getting plenty rich off passive income.

At this point you should be thinking about how you make your money. You want to put all your work into building up income that is leveraged and passive. Of course you may need to feed your family right now and you may need to work a regular job for some non-leveraged active income. That’s fine. You just want to start putting more work into income that will pay off years from now rather than just making a quick buck.

Ask yourself: What Kind of Money do I make? What percentage is leveraged? What percentage is Passive? This will give you a big clue into how Rich you can become!

Back to reading Part One or continue reading Part Three

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