Myth #2 - Passive Income

This is the second installment in a three part series on wealth and money. Part one of the series was on Financial Freedom. Part two is on Passive Income.

Passive income is a myth, just as Financial Freedom is. Think about the word "passive". Webster’s defines the word passive as "Inactive." I believe the words we use to describe our experiences become the experience. One of the most powerful determinants of our life is the words we use and what we say to our self. If we are in pursuit of passive anything, what do you think the message is to our brain? How can I do nothing and get a bunch? How can I be inactive and get rich? How can I do the least and get the most? I don’t think there is such a thing as passive income.

What do you think your health would look like if your goal was "passive health"? How about your relationships? What if you went to your partner and said, "From now on, I only want passive sex"? When you really stop to think about the word "passive" and the goal of passive anything you begin to see just how ludicrous the thought is and how damaging it can be. The thought relayed to your brain is that by doing nothing, I can have what I want, so most people spend their time looking for something that doesn’t exist, and therefore, wind up with nothing.

People who are intrigued by the concept of passive income are the people who put some of their income into a 401(K) and then turned their investment over to the "pros" and said, "I’m going to be passive. I know I did all the work to earn this money, but I am going to be inactive. I don’t want to know about all this money and investing stuff. Now that I’ve made it, I’m going to do nothing. Someone else will look after this investment for me and I don’t need to pay attention to it or understand what’s happening with my money. Shoot, I don’t even have to think about it because I read in a book that the goal is to have passive income, which means that I can sit back and be inactive and do absolutely nothing." These people found out that they don’t have 401(K)s, they’ve got 201(K)s. That’s what happens when you think you can do the least and get the most!

Money is like a woman! If you don’t think she’s important, if you don’t tell her she’s special, if you don’t talk to her and love her and caress her every day, she will leave you. Money is like a man. If you don’t tell him he’s important and wonderful, if you ignore him and decide to be "inactive", he will leave you. Money is like health. If you think health is unimportant, if you think you can create the health and the body you want by being inactive, you will soon be on your deathbed. Your health will leave you, too.

Think about passive in the context of a merry-go-round. Remember when you have gone to a playground and the kids jumped on the merry-go-round and yelled for you to push it? Remember how much effort it took to get it going? A bunch, right? But, once the merry-go-round was moving, the amount of effort it took to keep it going was no more than an occasional swoop with your hand. It required very little effort to keep it going. BUT, it did require some effort. You cannot be passive and expect the merry-go-round to keep going. If you ever decide to completely stop pushing the handle bars, the merry-go-round will stop.

The distinction I’m making is this: passive anything is a bad goal and a bad thought because it requires us to fall into the trap of thinking that by doing nothing we can get what we want. A much better thought is "Leveraged Income." Now, that is a word I can get excited about. If I am focused on leveraged income, then I am focused on having my money make money; I am focused on using OPM (Other People’s Money); I am focused on OPB (Other People’s Brains); I am focused on OPN (Other People’s Networks). I am active and involved when I am leveraging. I’m playing smart. I’m using my brain to achieve my goals. I am active in the process of leveraging. I am not focused on doing nothing, on being passive. Instead, I’m focused on how do I take the resources I have and grow them most efficiently and effectively.

When you stop to really look at the most financially successful people on the planet — Bill Gates, Warren Buffett, Michael Dell, Richard Branson, Larry Ellison — you will not find any of them doing passive. They are all active, but they are leveraged. Furthermore, none of them started their businesses because they were looking for passive income or financial freedom. If they had, they wouldn’t be the success they are today.

Success in any endeavor requires you to be active. Nothing you want is attained by being passive, including wealth and income. The seductive siren’s song of "passive" income is one of the reasons so few people have the wealth they want. Rethink your goal and how you can achieve it. Start looking for ways to leverage yourself and your money. You will be stunned by the difference it makes in your life and in the obtainment of your goals.

Hati- hati dgn Financial Freedom

Myth #1 — Financial Freedom

Every time I speak these days, someone in the audience wants to talk about their frustration with obtaining "Financial Freedom, Passive Income and More Time." This newsletter is the first of a three part series on these issues.

Let’s start with financial freedom, which is a myth. The real issue is NOT financial freedom. The reality is that you already have that! Compare yourself with the rest of the world. If the world was a village of 1,000 people, 500 went to bed hungry last night, 600 are illiterate, and 700 live in shanty towns - no running water or central sewage. (It adds up to more than 1,000 because some people who are hungry also can’t read or write.) 60 would have ½ the income and if you make more than $30,000/year, you are in the top 1% in the world! In other words, you are already financially free and rich beyond measure in the eyes of the rest of the world, which is why I said financial freedom is a myth.

The real issue is how much do you want and what kind of lifestyle do you want with your "financial freedom"? You can be financially free on $2,500/month, and I know many people who have this amount as their goal. The problem is that the quality of life and lifestyle you will have is not necessarily one of abundance unless you decide to move to a third world country.

Financial freedom is a myth because we talk about it as if it would be the panacea to all our problems. I keep asking audiences and students this question: "If I could get you all of Bill Gates money this afternoon, but the exchange would be that you would agree to spend the rest of your life in an iron lung, paralyzed from the neck down with no friends or family around, would you make the exchange?" So far, I have no takers on this deal, which doesn’t surprise me. If you are obsessed with the pursuit of financial freedom to the exclusion of an abundant life and a great relationship and massive health and a deep spirituality, you will find yourself looking back one day in utter dismay and regret.

If we put as much energy and thought into creating a life worth living, in growing and making a contribution as we do in pursuing the seemingly holy grail of financial freedom, we would be stunned by the results we would get in all our lives.

Don’t misunderstand what I’m saying. Money and wealth and financial abundance are a critical part of living a full life. But, it is not the only thing there is in life, any more than relationships or health or spirituality are the ONLY things important in life. Financial freedom is an outcome — an EFFECT! Too many people fall in love with the EFFECT and not the CAUSE, and the key to having what you want in life is falling in love with the Causes!

What would you do with all the extra time you would have if you ever achieved the financial freedom you desire? Most people don’t have a clear answer to that question, but if you are one of the fortunate few that does know, are you already doing some of that in your life right now? If not, why wait to do it perfectly "someday?" Why not start today and do it imperfectly and see what results you start getting? Anything worth doing is worth doing POORLY!

To start a business based on the desire to become financially free is a huge mistake and a prescription for disaster. The wealthiest people on the planet did not start out saying their goal was financial freedom or retirement because if they had, they would have stopped long ago. The 10 wealthiest people on the planet are all still working — not just 40 hours per week, either. Bill Gates, Michael Dell, Warren Buffett, Larry Ellison etc are all still regularly logging 60/70/80 hour weeks. Not one of them is concerned with financial freedom or retirement.

You see, retirement is simply doing what you want, when you want to do it. Each of the Forbes 400 is doing that. They have all retired — INTO their jobs and companies. They have all fallen in love with the CAUSE. They are passionate not because of what they are doing, but because of how they are doing it. They are growing and contributing and focused on solutions, which means they are excited and excitement comes not from what you do, but rather how you do it. Remember, it’s never about what you do, but rather how you do it.

If the pursuit of financial freedom seems difficult or if the sole reason you are pursuing it is because of a desire to "do something else", why not start doing some of that something else today? Why not fall in love with what you are doing and retire into your job or company and give yourself to it 100% and see what it gives back to you.

But, most importantly, remember to keep your life in perspective. This lifetime is not solely about getting to financial freedom but rather to live it so that at the end you can say, "This was my life. I am proud of it and I would gladly live it again if given the chance!"