Increase Your Passive Income to Gain Financial Freedom

The article was written by Rajen Devadason and was originally published on New Straits Times.

There are times when the observant among us can tell, as a society, that we’re hurtling towards doom. When that occurs, what may we do to save our families? With very few exceptions, we go through life needing to work. There are two reasons for doing so:

1. Work gives our lives meaning, significance and purpose; and

2. Since it costs money to live on Earth, then to earn that money actively, we exchange some of our time and utilise our skills, talents, knowledge and strength to earn money by way of a salary or business profit.

For most of our adult lives, we focus on the second reason — we work for money. Usually, the way to bypass that basic equation is to have someone else support us economically, which still boils down to another person working hard for money to provide for us.

More rarely, everyone in the current generation of a super-wealthy family can afford to relax and live off a massive nest egg accumulated by the family’s forebears.

And, yes, you guessed it: Those savvy ancestors did the hard and smart work required to earn oodles of cash, and were then wise enough to retain and multiply that pile of wealth.

Most of us, though, have to work both hard and smart for ourselves; ideally, harder and smarter than anyone else in our company, business or organisation. No one else can do that for us.

The happiest of us in this large subset of humanity that must work to live are those who are able to follow our bliss in the selection of our careers.

In so doing, we attain major success because we find meaning in our work and reinforce our personal sense of significance by detecting our purpose in life through service to others.

Pendulum Swing

As our years stretch into decades, we slow down physically and must accept ageing is an inevitability all of us who live long (and prosper?) face. Yet, we still want to live lives of meaning, significance and purpose. That is as it should be.

But ideally, as we age — while enjoying the fruits of our years of paid labour — we shouldn’t continue endlessly chasing the almighty US$ just to survive.

There needs to be a vital pendulum swing from the chronological side of our youth marked by working-for-our-money over time to the opposite end of grizzled maturity funded comfortably through having-our-money-work-for-us.

Not all of us sacrifice wisely and aggressively enough in our early and middle adult years to succeed financially later.

Here’s a sad, shocking truth: In almost every country on Earth, just between one and three per cent of each national population has exercised enough control to attain financial independence through self-discipline.

Most older people in most nations only succeed partially. They will therefore have to rely on their working children and, hopefully a high performing government, to pick up their retirement shortfalls through large geriatric budget allocations funded, respectively, by channelling resources from personal earnings and higher taxes.

This state of affairs is steadily exacerbated by the greying of society stemming from falling birth rates among the productive young, and lengthening lifespan amongst us all.

Channel your surpluses into investing in passive income is a great way to achieve financial freedom

What can we do?

What I’m describing is in all likelihood keeping competent finance ministers, chancellors of exchequers and numerate heads of state up at night. So, what are some solutions for our planet?

Here are five from me:

1. Elevating educational and managerial standards so aggregate productivity rises;

2. Eliminating corruption so sovereign wealth leakages are plugged;

3. Harnessing technology and artificial intelligence to expand the store of wealth available to the old;

4. Raising retirement ages intermittently across one generation to the next, so the average period that needs to be funded in bona fide retirement is moderated; and

5. Increasing the number of hours worked each week by those eager to work harder and smarter to generate surplus wealth for an uncertain future.

You can tell my cold-blooded analysis above will never win me fans (or votes) from a global populace that’s been conditioned to swallow that those in power should solve all their problems. It’s a good thing I’m no politician.

The best I can offer by way of a solution is at the granular level of the individual. In my opinion, what each of us needs to do is:

Increase our passive income to gain financial freedom.

Towards Financial Freedom

Those of you who head your household and make the primary planning and financial decisions for your precious family would be well-advised to accelerate the personal pendulum swing I mentioned earlier from working-for-our-money to having-our-money-work-for-us.

This speeding up of the process requires we do four different things:

1. Exercise delayed gratification;

2. Build up monthly cash flow surpluses;

3. Channel those surpluses into savings and investments; and

4. Diversify the passive income streams built up – over decades of resolute fiscal discipline — to include interest, dividends, distributions, and rent.

As a licensed financial planner who helps his clients do these things, it’s easy for me to outline the needed steps. Your job is tougher.

Will you really do the work, make the sacrifices, and learn the numerous lessons needed to complete your personal pendulum swing from work dependence to full-blown financial freedom?

How to Earn Passive Income with Foundation Capital

If you want to generate a sustainable passive income stream, Foundation Capital is one of the most reliable organizations to invest in.  Our process has been refined, perfected, and proven over the past 12 years of renting our clients’ assets to the construction industry.

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