This is number #1 rule to build and live a Passive Income Lifestyle:
always ensure that your assets pay for your lifestyle and your luxuries, and not just put everything and anything on your credit card/tab or from your earned income.
Robert Kiyosaki put it in the best and simplest term to explain what an asset is, in his Rich Dad Poor Dad series:
An asset puts money in your pocket; liabilities take money out of your pocket.
You must be able to identify what is an asset, and what it does, before you can build, buy and acquire more. An asset puts money in your pocket via rental/lease income, dividend or royalties. Assets are businesses, properties, real estate or intellectual properties, be it in full (full ownership) or parts of (such as stocks or shares).
As assets puts money in your pocket periodically, what the rich does is to ensure that their assets provides the income to sustain the level of lifestyle and luxuries they wish to have.
Financially and personally, I find that if you spend your hard earned money and income on lifestyle and luxuries, it isn’t sustainable, because if you want to buy more luxuries and afford continued lifestyle, you then need to earn more income – I prefer to be a bit more strategic, and use my hard earn money to FIRST buy, build and acquire my assets that can fund my lifestyle and luxuries.
When the passive income from my assets can sustain my lifestyle and luxuries, then I have options to take any surplus from earnings from income or from assets to invest in more assets, and this is how the rich get richer – just keep identifying and acquiring more and more assets that puts more and more money in my pocket.
If you’re finding that you have insufficient every month, buying and acquiring assets may not be your first focus, you may first have to ruthlessly cut out unnecessary expenses and combine it with the pursuit of:
- Passive Income Internet Businesses (PIIB)
- Passive Income Investing (PII)