The MYTH of PASSIVE Income! (How To Make Money In Canada)

It doesn't matter if you're in real estate or the stock market or index funds or cryptocurrency. I don't care what the industry is. If you don't have a level of some specialized knowledge in that you're, you're leaving something on the table or you're putting yourself, your risk and your family and your, your wealth, your future and your passive income all at risk. So get yourself educated. Like, like just don't be a bump on the log. Get in the game.

The myth of passive income, what is that all about? People talk about passive income. It's a term that's thrown around a lot out there. But what really is passive income? I'm here today with my colleague Richard Canfield. I'm Liz Lamond and we're going to talk about the myths around passive income. Richard, what have you got for us today?

Passive income? You know, I love buzzwords and buzz terms and I know like the thing that got me on the journey of learning about infinite banking concept, learning about becoming your own banker initially was a drive and an understanding to learn more about methods and ways to create passive income. It all started for me back when I read Rich Dad, Poor dad. And I think that was going back to 1999. And that's when the concept was first kind of exposed to me. And many people I've talked to, many of my clients even that was their gateway drug to bridge the open the doorway of what passive income was. The problem is that we talk about ways and methods of building and creating passive income. There's usually some core things that are listed in the list, the old staples. What I've come to realize through conversation with other people and my own personal experience, we'll share some of that with you today, is that these things aren't always that passive. Passive. If we're really looking for passive, that means it's money showing up where you don't have to do anything that's passive. As soon as you have to go do something, now you're getting into the activity level. And so what? What's the quotient or relationship of how much activity are you willing to contend with for income? And where do you draw the line in the sand on whether it's passive or not? Is it 15 minutes a day of effort? Is it two hours a month of effort? Is it zero effort altogether for an entire year? So where do we draw the line on what's actually passive and what's active? And I think that's the missing link that's the biggest myth that we need to identify here. So we're going to talk through that a little bit and we're going to share some stories with you. I think, Liz, you got a couple of doozies. I know I do.

Let's talk about real estate. Real estate is often described as being passive income. Now it is possible for it to be if you're willing to pay for somebody else to do all the other work, but then that's going to eat into your passive income. So it's understanding that there are some activities that need to happen regardless of what you're doing. And so which ones are you willing to do and which ones are you willing to pay for?

So.

So let's just talk about tenants. I personally know that I've had phone calls, you know, late on a Sunday night when I'd really rather be sleeping, that the place that my tenants are in is flooding. That doesn't feel too passive at that point. I'm now having to find a plumber or something to fix the problem for the tenants, you know, getting late on a Sunday night. So there's nothing too passive about that. And I think, you know, just about anybody who's owned real estate hasn't always found it completely smooth sailing with tenants. If you have there's then, congratulations, you're one of the few. Now you can pay a property manager to manage all of those calls. Absolutely. And that's something that a lot of people do, especially when they grow that income. But understanding that's also eating into your passive income. So that goes to the work to passive income ratio. Who's going to be doing that work. And so understanding that passive income and to make it truly passive is going to come at a certain cost to you in one way or the other. That's either time or money.

You know, I've owning real estate for a large number of years, most of my, most of my life really. And I certainly haven't experienced everything. There's always something new to learn. But I've had a lot of doozies. You know, I've had to move enough appliances in my day and I've had fine and track down appliances and hire managers and the whole works and renovations and flooding. You know, I've had those flood calls and like there's this feeling in the pit of your stomach when you have to deal with that because would you believe it, that the tenant has no sense of humor at all. They're not willing to just live in a house that's flooding like their basement. And all their stuff is floating around in the basement. Like, yeah, they don't like it at all. Imagine just picture yourself in your own house. All of a sudden you walk downstairs and your basement's like got four feet of water in it and your stuff is. Your pictures of your family, photo albums are floating around. It's not fun. You have responsibilities as an owner and yes, you can offload these responsibilities from the person. Property management. Now if you're watching this, if you've in real estate and you've hired a property manager, maybe you are a property manager, there's some amazing ones out there. But I know that I've had to manage the manager and I've had issues where you have to find that person, then you have issues. They're not dealing with things properly. You have to get involved. Okay, well now this manager's not working out. I got to go find somebody new. So the periods of time that you can go through where you have passive stuff can be really good. The market can be good. Rent, you know, you could charge anything you want for rent because rents are up and everything's going well and now you got a decent tenant because they just want to stay in a property, everyone's happy. Yeah, you get two years, two and a half years, whatever, three years of some good solid income. You get a long term tenant, everything's going well. And then all of a sudd and boom, you get that phone call and it's like you got hit by a Mack truck and oh, got to replace the furnace, got to replace the hot water tank. Got to. Tenants vacated. They did a midnight move because they lost their job because the economy went into the tank, because everything goes in cycles. And all that passive experience that you just had gets eroded because of all the costs now associated with bringing it back to okay, now you got to go repair the property, you got to go fix some drywall, do some paint, do the shingles and all the maintenance related things that need to happen. Now there's other reasons why you're owning that real estate for a lot of people is that cash flow oriented piece. But there's also some equity pay down. There's other advantages. But if we're focusing on passive income, if that's your intention, your objective is to create as much of it for as long as possible with the least amount of work. But understand, least amount of work and no work are two different things. There is activity that's going to be required if you're in the real estate game. And there are points where you can get into a very passive status, but it always comes at that cost. Someone needs to be paid so that you don't have to do those things. And that means that we're giving up some of the income that we could have otherwise earned. Which is okay, because if you want passive, it can be done. But to get to that state, you need education, you need people, you need contact. All these pieces need to be in place to get you to that promised land of passive income. For most people, that doesn't happen overnight. What they got to do is they have to capitalize. They have to capitalize in their time, their education. I got to go take some real estate courses. I got to go network and meet some people. I need a plumber, I need a property manager, I need a good realtor. I need a mortgage broker. I need all these teams of professionals so that when you know, the hits the fan, excuse my language, there's other people to clean it up so you're not the one that's just covered in it. Like that's what has to happen. Real estate's great. Big fan, a lot of clients, a lot of friends, big in real estate, a lot of great things can be done. It's this staple of a way to hold and generate income revenue assets that's been around forever and ever. But make no mistake, work's gotta happen. Someone's gotta put in the effort. It's either you or it's someone that you gotta pay. No two ways about it.

Yeah, I think that's really important. Like it's not the asset that we're talking about, it's the. We're just talking about the passive income component of it. So just understanding what that is. So we looked either at like stock or an Amazon business or something like that. Next same kind of thing is that you either need to become educated on how to invest in stock. You need to put time into finding someone who can advise you on that Amazon business. You need to learn what you're doing. Unless you're wanting to run it certain amount of time, then you're going to need to find someone who can run it for you or with you. So all of these other types of passive income options are going to involve an initial investment of capital and usually an investment of time. And then there's also that maintenance of them. What is that going to do in terms of what capital is required and what time is required?

You mean if you put a little bit of money to go like buy a business or start a business and you hire some people to Run the business. Like, sometimes those people leave and they don't work for you anymore and you need to hire someone else. That's maintenance. Sometimes, like the rules change in the regulations on the business. Like, I don't know. COVID 19. And all of a sudden you need to get plexiglass and masks and your business is shut down. Like, these things are the maintenance that happen. There's always a target, there's a reason, there's a goal. There's something on the other side of that. But there's going to be some stuff unfun, unfriendly in your face. Probably some sleepless nights with your head crying into a pillow because it sucks that you got to push through, which is active, to get back to that passive income state. All we're trying to share with you guys, like passive income is amazing. It's great. We know tons of people that have it. I've experienced it. You've experienced it. How long do you experience it for? Is part of the key. And then just recognizing that there's always going to become a point where you might have to insert yourself, and it's either going to be through your own efforts or the, you know, the stress levels and all the things that kick up to be able to get through that experience to keep that income going. When you talk about, you know, stock, stock portfolio, a lot of people do that. They're doing, you know, rel. We had a big boom, run the stock market, everything. But that stuff is cyclical. It goes up and it goes down and. And if you're not managing it or you don't have a professional, someone who actually knows what they're doing, managing it, that you can trust. Because everyone here has heard a story of someone that, yeah, hey, my guy is great. He did awesome. But then as soon as the market shifts, like, he's not so great anymore and we can't get a hold him, it's like his phone's disconnected. So you can hand that off to some team or advisory team. But you got to understand, like, there's a cost associated to that. And there's also the risk now associated that too, because you're separating yourself from your money. Whereas if you're doing it yourself, okay, well, how many minutes a day are you spending? 10 minutes a day, 15 minutes a day? Are you doing option trading? Like, what is it you're doing? Are you spending an hour a week? How much are you going to invest in yourself and your own time to help be involved in the management of the thing that you want. I personally think you should spend more time in it. My belief is that we want to help people become closer to their money and not be separated from their money. We want to bridge the gap to bring you closer to where your money is and what it's doing. So the more you're aware and understand what your money is doing for you and how are you able to pivot and make changes quickly on the fly, that's a direct result of your own education and knowledge because you can see things that otherwise you wouldn't be able to see. It doesn't matter if you're in real estate or the stock market or index funds or cryptocurrency. I don't care what the industry is. If you don't have a level of some specialized knowledge in that you're leaving something on the table or, or you're putting yourself, your risk and your family and your wealth, your future and your passive income all at risk. So get yourself educated. Like, don't be a bump on the log. Get in the game.

I think a really important point that you raised, Richard, is that passive income actually requires regular action. So to maintain that passive income, and that's probably one of the myths that we're trying to talk about today, is you actually need to have regular action to stay in the game and stay informed. Because otherwise that passive income isn't going to last very long. It's kind of like, you know, it takes a certain amount of effort to get up to a level of fitness, but unless you continue to do that level of fitness, you're not going to maintain it for very long and you're going to have to work harder to get back up to the same level of fitness. It's exactly the same with your money. If you, if you leave that for a long period of time, you're more at risk of having a big swing in your results and that, that may not be now producing passive income for you. So it's being aware that you're going to need to have some involvement on a long term basis.

So we're going to referencing page 85 of Nelson Nash's book Becoming your own Banker. Right at the beginning he says there's only two sources of income. There's people at work or money at work. Well, people at work, we often think it's us, oh, I have to go and do that work, do that effort. But you know, in a business structure, if you have employed staff or team members or contractors, et cetera, people that you're managing and they're doing the work, you're compartmentalizing that so that things can happen. You can get passive businesses that do that sort of thing for you or money at work. If you're familiar with Robert Kiyosaki, he talks about the cash flow quadrant. Great book, by the way. And he's getting people to move over to the right side of the quadrant, which is the B for big business. A business that his definition is that a business where you can leave it for 12 months and come back and not only has the business is still producing an income and it's actually grown. That's his definition of it that he references. And the bottom quadrant is the I quadrant of the investor quadrant where your money's working for you. Robert Kiyosaki, in a lot of interviews and things and reading through his materials, you'll recognize that the way he did it is he earned his money and his wealth in business by building and creating and then investing in businesses, taking his profits and his revenues from those businesses and then investing them into assets that were ultimately like a business, like you know, buying a hundred unit apartment buildings that's managed with an on site person and a team of people. So again, that's getting into that passive realm because you know, he literally doesn't do anything with it because he just owns the asset and he's like, look, here's a manager here, here's this person, here's a manager for the manager. There's an on site maintenance guy. It's like that's just handled sort of a situation. So it absolutely is out there, it does exist. But it's also recognizing that that just didn't happen overnight. He didn't just have a hundred million dollars in his bank and oh, let's go buy some real estate. Like he had to go create the a hundred million dollars. He had to go and create the businesses that leveled up and leveled up and leveled up, just like the game of Monopoly to get there. Now the other reason I mentioned this book is one of my favorite Pages is page 85 of Nelson's book Becoming youg Own Banker. You don't have a copy. Make sure to get a copy. Should be a link in the description below to do that. Point number two, he says, if you knew at passive income time that you would be getting back every single dollar that you put into a system potentially tax free, would you ever object to putting any more into it? I love the way Nelson says that because he's talking about a known event in the future. If you could actually bank on if you could recognize and understand that that's an outcome that will happen if you do the thing on the front end, then that's the basis. What he's really referencing is setting up a structure for the purposes of becoming your own banker. A high cash value, dividend paying, participating whole life insurance designed in such a way to produce that result. And if you working with a trained professional who knows how to do that, you actually can create that passive income. Because all you're doing is you have to fund the system which you can use throughout your entire lifespan. And at some point in time you want to be able to draw from a passive income stream again potentially tax free, then you can do that through that mechanism and an actual passive situation where there's no work involved for you. Work is happening by the insurance company and by all the team of professionals there and by actuarial design and because of 200 years of history and statistical data that was pre work that was done before you were even born. So that work has already kind of happened. All you have to do is show up at the beginning, capitalize, get the thing off the ground and running, learn a little bit about how to use it because it's important. But then you're creating that long term passive stream so there's some front end effort like everything's going to have. But that front end effort can take you to a really fantastic, peaceful, stress free way of life down the road. That doesn't mean you don't want to maybe get some of the other stuff and do some other, get some real estate, do all these other cool things. But what you want to think about is changing where home base for your money is. Your money's got to reside somewhere. It needs a home base. It's got to be stockpiled, stored. Well, are you going to do it in your regular brick and mortar bank or do you want to do it inside of an entity that you co own with the insurance company and just for the privilege of having it, they protect your, your family with a bunch of tax free money that shows up the day you leave planet Earth. You know, if I get walk out the door and get hit by a bus, I hope that doesn't happen. A whole bunch of tax free money is going to show up for my family. Great. Meanwhile I was able to use capital because I'm stockpiling it there effectively. And if I want to go and buy a property and put down payment or go and fund a renovation on a flip deal, I can access capital through collateral, I can go and do that deal work effort. Not very passive. If I'm doing that flip deal, I'll tell you that flat out. But when that deal's done and complete, if I'm profitable, I could take all that money and I can replenish my pile and I can wait for the next opportunity. Meanwhile, the whole thing is covered under a tax free wrapper in the event that I go and get hit by a bus. That's a simple way of doing financial life, I think.

Creating assets that when you get to the point where you really don't want to be focusing on so much effort and action, having assets that are going to provide that passive income for you during passive income times later in life. Very, very powerful. If you'd like to learn more, please click on the videos that are appearing below.