Saturday, May 6, 2017

Passive Income Allows You to Work Smarter, Not Harder

My dad was one of my inspiration that gets me to where I am today.

We were taught from young to grow up and become a doctor, lawyer or pilot. I was reading my son's book the other day and saw the same first few profession being taught and ingrained into his mind.

I recalled when I was young and my teacher would require me to complete the form and in that field I had to put my dad's occupation. I proceeded to ask my dad what I should put and in the end I had to input different professions like merchant, entrepreneur, businessman or unemployed but it was always unclear to me why he didn't have an official fixed profession like an office clerk, teacher, pilot, lawyer or accountant.

It turns out that he was building a stream of passive income. 




Now, one caveat I need to make here, is on the definition of what passive income is.

While I understand that many tries to advocate passive income as income that one needs to abstain from putting any effort in, it is quite different in my dictionary.

In my definition, passive income are earnings that an individual can derive from multiple functions of assets that he or she enjoys to be doing at and over time be less actively involved in the maintenance of keeping it going. They are basically the contrast of an active income, where you have to be physically present to provide a service and get a fixed amount of salary or wage for performing that service.

Warren Buffett quotes it best when he said:

"Someone is sitting in the shade today because someone planted a tree a long time ago"

It is true because the onset of planting a tree takes hard work, efforts and most importantly patience but as time goes by, you'd be able to enjoy the fruits of your hard work.

While this blog is almost exclusively talking about stock investing and using dividend as example of passive income, there are a lot of other avenues that you can think of.

For e.g creating a website or an ebook takes a lot of work in the beginning, and blogging about the content takes even more time in terms of number of hours spent, but it is a pretty obvious scalable projects that will grow over time.

The only issue with pursuing an active income approach is it isn't scalable high enough unless you are really capable. And even so, sooner or later you'd be bounded by the resource of time, because everyone have the same number of hours in a day. That doesn't mean that it's not important not to focus on building up your active income, rather it should be a means to open your gateway towards achieving other streams of income.

On the personal front, I am lining up a few projects that I have in my mind that I think I would like to do and achieve in my lifetime. While they are going on a snail pace because of time resource and the fact that I am still spending much time on my active job, I'm sure there would be a time when the tide would turn and I would be spending more time doing on my projects.

Until then, I'd continue to work on my passive income streams from different avenues and hope to achieve the dream I'd like to achieve someday.


4 comments:

  1. B,

    Now that's not losing sight why you wake up in the morning ;)


    The best role models are parents.

    You dad is fuzzy grey like nobody business.

    "merchant, entrepreneur, businessman or unemployed" - that's the dream of our Chinese diaspora story :)


    ReplyDelete
    Replies
    1. Hi SMOL

      I think I can't really appreciate it when I was young because I thought everyone would be a doctor, lawyer or pilot.

      I grow up thinking he is a nobody to that one body whom I look up to in the end.

      Delete
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