We have all been lied to. For years and years, we have been told the wrong message on how to go about building something for ourselves.
I think a majority of people have heard the saying “Go to school and get good grades so you can work for a good company and make a lot of money”.
That sounds like a wonderful plan, and it seems amazingly simple but here is a list of things that are wrong with that statement:
No guarantee of a job out of college in the field you studied
Good luck paying off your student loans at an entry level job
Promotions are not guaranteed
Raises are not guaranteed
Your income is only guaranteed as long as you work and meet quotas
If some dumb CEO messes up, you are out of a job because the company goes bankrupt
You have to take 40+ hours away from your family to be guaranteed an income
You are an expense to your company, so they will want to replace you with a cheaper alternative ASAP
The risks of being an employee are numerous. But there is another way to make money that I never heard of until I got out of college. It is called PASSIVE INCOME.
This type of income, you get automatically, every day / week / month / year. This can be achieved many ways.
You can create a product and get people using it on a daily basis, and buying it from you on a daily / weekly / monthly basis. This sounds good for something like cosmetics, certain food products, toiletries etc.
Once you get people using something on a regular basis, they are going to pay you on a regular basis. This is where the number start to get really fun.
I like numbers because they are exact. What I am going to do for the rest of this post, is do some simple math problems to show you the power of having a passive income and what it represents.
It is my believe that a passive $1,000 / month for most working class people would ease their struggles significantly. This is $1,000 every month that you get no matter what.
You still have a 40 hour a week job, but have a side gig that brings you $1,000 a month. That is an extra $12,000 a year.
We are going to continue this article under the assumption that this is all pre-tax money. We will not worry about any tax consequences during this article.
Lets look at what $12,000 looks like in the stock market. To receive any money in the stock market without selling your stake in it, you must own stock in a company that pays something called a “Dividend”.
A dividend is normally paid out every quarter. The “Dividend Yield” of a stock is the amount of money paid out yearly as a percentage of the price of the stock.
So if a stock is priced at $100, and it pays out $1 every quarter, the annual dividend yield of that stock is $4, which is also 4%. So the annual Dividend yield for this stock is 4%.
The average annual dividend yield across the Dow Jones Industrial average is 2.2% yearly.
I am going to use the top performing dividend sector, which is the “Basic Materials” sector of the market. This sector averages 5% annual dividend yield.
Now comes the full-circle. We were making $12,000 passive income annually. Let’s imagine that this is the 5% annual dividend yield of a stock you own.
To get $12,000 as a 5% annual yield, you would need to have $240,000 invested in that stock. That is if you are getting the 5% annual dividend yield
If you were getting the Dow Jones Industrial Average Dividend yield, you would need to have $545,454 invested in the market that averaged a 2.2% annual yield.
This is a tactic that the wealthy and extremely wealthy use all the time to guarantee income without spending their principal investment.
So now lets look at the numbers needed to build a $12,000 annual passive income. With the invention of the internet, reaching millions of people has become an easy endeavor.
There are 2.94 billion people with access to the internet. Lets say that whatever service / product / research / information you decide to provide people with, is worth at least $1 a month.
This means you only need 1,000 people to give you $1 a month. So you need .000034% of the internet to give you $1 a month.
Knowing these numbers, is there anything you can think of that is worth at least $1 a month to 1,000 people.
Maybe how to keep their lawn green. Maybe you can show people how to perform basic maintenance on a popular car (honda civic, toyota camry etc.).
Maybe you can help connect businesses to customers and charge a monthly fee. There are plenty of problems people need solves.
So go get some people to agree to give you at least 1$ a month for something that you can do very easily.
Go build that passive income and start living like the millionaires do.
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