Truly passive income. That’s the goal, right? Earning money while not working to do so. Going to sleep every night, and waking in the morning to find that someone has put a dollar in your wallet. Pretty cool, but nothing I’m going to wet the bed over (outside of the thought of someone sneaking into my room while I sleep). But now imagine someone putting $5, $10, $15 into your wallet every single night. That’s something to get excited about. You literally find yourself with more money everyday, and you have to do nothing more than stay alive. Income doesn’t get any more passive than that. You might be thinking “Well duh-doy. But how do you do it?” Invest. Investing can result in the single greatest form of truly passive income imaginable.
Like me, you probably sell your time. You exchange your labor for money. You receive a paycheck upon the completion of the agreed upon work. That money is yours to do with as you wish. You pay for your necessities. Maybe a coffee here and there, or the cable you swear you’re going to cancel soon. But once you spend it, it’s gone. That all-too-familiar “oh crap, where did my money go?” feeling we’ve all had at some point. So, what are you really doing with that money?
I would argue, whether you’re 25 or 55, you should invest it. The American stock market has been the single biggest wealth creation vehicle known in the history of mankind, and this fact is both known and ignored by the greater population at large. And most of that has to do with psychological barriers and the money illusion. Someone would rather have $10,000 sit in the bank unchanged, year after year, with inflation eroding their purchasing power rather than using that money to make money. “I don’t want to invest and then lose all of my money.” Well, you’re not alone. Nobody does. An easy way to avoid that would be to invest in an index tied to the S&P 500. You have immediate diversification in 500 companies. Or, you could simply invest in the bluest of blue chip stocks. Think General Electric, Johnson & Johnson, or Coca-Cola. I have no idea if we’re all still going to be on Facebook in 10 or 15 years (probably not) but I will sure as hell bet that we will be using light bulbs, band-aids, and drinking Coke. Those companies were around long before we were born, and short of a catastrophic, earth-shattering event, will be here long after we’re gone.
Tomorrow you could log into any of the multitude of brokerage websites, and buy a single share of General Electric for around $25. Every 3 months they will send you $0.22 as your dividend payment. That is your cut of the profits. You are part owner of the business, and as such, are entitled to a piece of the pie. GE is a giant, well run company with a multitude of products and billions of customers, so their profits are likely to increase. Next year they will likely send you an increased dividend (provided the profits increased), and then more the following year, and so on and so forth. Now imagine you buy 100 shares of GE. You spend around $2500, and receive $88 per year. If they never raise their dividend, in about 28 years you will have recouped all of your original investment. From that point on, you will be receiving nothing but pure profits. Now imagine they raise the dividend consistently each year (which they had been doing prior to the great recession) and you’re looking at an even shorter time frame in which they repay your investment. Now, imagine you purchased the stock at a discount and they raise the dividend consistently every year (I tingle just thinking about it).
Of course, as I wrote about the other day, stocks will rise and fall in price. The key in all of this is be consistent, and over a period of time you will find yourself with a number of ownership shares in a number of companies. You arrange your life and your finances so that you can become a larger owner, become entitled to a larger cut of the profits, and receive more money each day, each quarter, and each year by just staying alive. Income doesn’t get more passive than that.
Side Note: A blog is not passive income. Do not let anyone tell you otherwise. This shit takes work. And then some more work. And then a little bit more on top of that.
Another Side Note: Can you tell what’s been on my mind lately? If you said “Investing” I hope no one was around to hear you talk to you computer. But yes. You are right.
Last Side Note: Yes, you will have to find a way to earn the income with which to invest. But once you do, your money will be working for you.
How do you try to earn truly passive income? Is there another way that is more passive than investing?