Money Grows on Money

The secret to wealth is you don’t get rich from your paycheck alone. Relying only on the income from your 9-5 job, will not allow for a life of financial freedom. Passive income (mailbox money) allows you to escape the rat race and build wealth.

The money river shown in the chart above illustrates how this can work for you. Your “skills bucket” is the money you earn each day when you go to work. A-B=C is a formula I have used throughout my life to make sure that my Income (A) – Expenses (B) leaves me with money left over to invest (C). What you do with your leftover money (C) is your wealth determiner. Money, which doesn’t need sleep, won’t take vacations or call in sick, will go to work for you, while you sleep. When the mailbox money comes in and you put more back into your “depository accounts”, without having to work for it, your money compounds quicker over time.

The sooner you start focusing on your passive income, the sooner you will achieve financial freedom. Here are a few tricks and methods that I have used throughout my wealth building journey. Run the formula A-B=C How much do you have left to invest? How can you increase that number by decreasing your expenses by only going out to eat once a week, avoiding the Starbucks coffee or skipping a shopping trip? What percentage of your income is vertical (work for pay) versus horizontal (mailbox money)? How does this compare to your dream budget?

All markets go through booms and crashes, peaks and valleys. While there are some ways to keep up with trends in an effort to time the market, the bottom line is, the lowest point no one can definitively predict. More importantly, no one can control it. The best way to manage this is by making sure you aren’t leaning too hard on your passive income, so you don’t topple over when the market does. Make sure you have enough equity and cash flow to pay your bills, and you’ll be able to survive market crashes. Downturns in the market are inevitable, and they don’t have to be catastrophic for you if you always have positive cash flow.

There’s no time like the present to start building pipelines to wealth.