Why You Need To Stop Chasing Passive Income

Hey there, real quick, before we jump into the episode, listen, if your earnings treadmill hasn't set you free yet, running faster won't either. Listen, hustle without principles just going to burn you out. So here's what I want for you. I want you to join me for my money machine experience Live. It is three free trainings. Deep dive into how to escape the treadmill and build a money machine that actually works for you. All right, Grab your spot here by going to moneymachinelive.com and I'll see you in the free training. Passive income. It's a freaking myth. There, I said it. I hear it all the time. You Hear it on TikTok, the Internet, the Instagram, all of it. People say you need passive income. You need passive income. No, you don't need passive income. Because you know what? It doesn't exist. Here's what does exist, and this. In this episode, we're going to talk about what you truly, really need to create a life that is a life by choice, a life of your own doing, a life that is in control by you. And it's not passive income. It's something else. I'll see you in this episode of the Affluent Entrepreneurship.

Look, I get it. It's been popularized by social media, by the Internet, by even authors. To sit back and say, imagine this.

You have this business, or you have this existence where you're sitting on a beach somewhere with a laptop, drinking a Mai tai or a pina colada, and the money's just coming in and you're just counting the money. It is passive income. You set it, forget it, and it's there.

And then you wake up. Because that is not the reality. And here's the thing. I actually don't. I totally get the dream, but it doesn't exist when you really start to look at it and understand what I'm getting at. Because the fact is, is there is no shortcuts to building wealth. There takes work. And whether it's work up front or work ongoing, there is work involved. And to think that all I need to do is like, I see it so much. Well, I want to become an independent influencer. Since when did influencer become a career? You mean you want to try and, and create a huge following on the Internet and, and then maybe you get paid for it and you're building this business where all of a sudden, if you fall out of favor, there's no income. You think that that's easy? Let's just talk about it for a moment. Just. I mean, I'm going to go on a side here because you're, you're, you need to be an influencer, which means you need to be on it, on the Internet, which means you're, you are putting yourself right in the crosshairs of judgment, criticism, critique, trolls, all that stuff. Tell me that ain't work. Tell me that doesn't feel good. So I'm not saying that.

There aren't leveraged ways to, to build income. I'm just saying that this idea of passive income we need to let go of. We need to understand the reality of how do we create a life that is a life of choice? How do we create a life that is a get to life instead of a have to life? How do you have a work optional life? And there is a way. It's just not something where you can just sit back and it just happens for you. Okay, so let's just talk about this because too often we think that passive income is the dream. It's not the dream, but it is something we're trying to move towards. But why do I not think passive income? And this is more a philosophical thing for me, but I truly believe that our money and our wealth is built on the relationship that we have with money and wealth and that it is a relationship, it is a give and take. And if I see money as hard, then the relationship is hard. If I see money as bad, then the relationship is bad. If I see money as stressful, then the relationship is stressful. If I see money as passive, then the relationship is passive. Here's what I, here's what I know. In, in June of this year, my wife and I are hitting 13 years married. All I know is that that's a relationship for us to work that relationship. Now, Lord knows you don't want to know what happened in the first year. That first year was a tough one. There was a lot of work there. Okay. We have such an amazing relationship now. Okay? And here we are 13 years later. But here's what I know. Had we not done the work up front, had we not gone through the tough times, had we not done that, we wouldn't have the relationship today. And, and.

It'S still work. It's joyous work. I enjoy her as my wife, as my partner and all that stuff. But the point is this. What would have happened to that relationship had I been passive with set it and forget it, which is what everyone's telling you to do? It would have withered and died. We wouldn't be married today. So just like Any other relationship. Your money relationship needs nurturing, your money relationship needs attention. Your money relationship needs work. Now, how much work? It's all, it's all dependent on you. So point being is that I don't like the term passive because it insinuates, set it, forget it and don't worry about it. There's a place for that. But if I come to it with this idea that I just don't look at it, I don't touch it, I don't do anything, I don't have to. Effort.

And then you wonder why you don't get the results you want. It's because you are passive about it. Here's what we want. Here's what we want. I think that what we really want is leveraged income, not passive income. Leveraged income, meaning this. How much effort do you have to put in to generate the income? And so it's never going to go to zero, as they insinuate in passive, but it is going to go up. So, and I'm going to walk through something called the five incomes, because this is how we look at it. And when you talk about building the money machine, which is what my book is, building your money machine, how to get your money to work harder for, for you than you did for it is all about that. How do I leverage myself out so I can have my fingers on the pulse. I don't turn my back on it at all. I manage it, I direct it, I hold on to it, but I'm not efforting every day. I don't look at, I don't look at the money machine every day. I don't look at our wealth every day. I don't look at the numbers every day. I don't even run my business every day, okay, because of how I've leveraged it. So let's just talk about how this plays out. Because there is what I call five incomes. And I go into more detail in the book. This is where you start to look at how do I leverage, leverage some things in doing this. Because what I want to do is focus on how much time.

And effort is necessary. And as I go up this hierarchy, I get more leverage. In other words, I have less effort to generate the same level of income. And so this becomes the way that we want to, want to start now at the very base, at the very base, at the very bottom. And this is where most of us start is this idea of active income. This is where we, we start. This is, this is our jobs, this is our business as a solopreneur Maybe you're a therapist, maybe you're an accountant like me. You're swapping hours for dollars. There's this relationship of generating income that's one to one. I got to put in at least one, one unit of effort to get one unit of earnings. Sometimes I have to put in more than one unit effort to get one unit of earnings. Okay? But at the beginning, this is where we start. Now some people stay there, they're always swapping hours for dollars. And, and, and if they're not on that treadmill running the miles.

They don't make the income. And so it was early on for me to, to figure out that, wait a second, I have to find a way to have the treadmill run without me being on it, doing the running, you know, so, so how do you do that? And so, but at the beginning, we're here, we have very little leverage. We're doing the effort. Okay. Then we get to, to the next, the next level. Okay? The next level is what I call business income.

And this is, this is really what we're doing here, is now all of a sudden we're leveraging our time. Okay, the businesses run or the. I'm making some money. I decided to bring some people in to get my time back. I try, I start to bring in people to help. I, whether it's team members in a business or it's people around the house. So I'm not cleaning the house or I'm not mowing the lawn and all of that type of stuff. But what's happening now is we are generating business income that isn't tied directly to our efforts and it's a little more leverage. But now I got to manage a team. I got to manage the whole group. Okay. But my, my daily effort goes down a little bit. These are the two primary income streams that most people focus on. And I'll tell you that, that for me, these were the two primary income streams that I, that I started with and had. Okay? But then you start to look at, oh, how do I leverage even more. And if we look at the next piece up, this, this is asset based income.

Okay. This is something that a lot of people are talking about. And it's this idea of bringing in a.

Maybe buying a piece of real estate or buying, buying a piece of equipment and renting it. So you're buying an asset that you're going to put out in the marketplace and get cash flow from it.

The, the most familiar one is real estate. I'm going to buy a rental Property, it's going to be a parking lot, a storage unit, apartment building, a single family home and I rent it. Now there's still work involved because I, I have to find the property, I have to evaluate the property, I have to buy the property, I have to finance it. There's risk involved because I have, I'm on the hook, I have to manage it. Granted you can get a management team, it may cost you, but bottom line is there's still effort involved. Now on an ongoing basis, once the property is in place, how much effort do you have? It's not a ton, but there still is, there's still going to be those calls, you know, that need repairs or you have a vacancy or you got a tenant that didn't pay all those things that they get in play. But it's far less then the, the, the two tiers below it, the two, two levels below it of business and active. And so now all of a sudden you go, all right, I'm starting to leverage up. There's another one above this.

And that is residual.

Residual income. And, and so residual income is really create something once and sell it repeatedly and get paid for it. So for instance, my book, Let me grab it, here it is, my book Building your money machine. That was created. It was created, spent a while creating it. Well over a year writing it, doing it, editing it, doing it all, doing the audiobook, doing all of that. It will continue to sell for the next decade or more. It will continue to sell for the next decade or more. I, I will earn royalties, residuals from it from, from that time. So now we put a lot of effort in at the beginning to create something. Could be a course that you white label it could be a downline in a network marketing. It could be intellectual property, songs, writings, movies, those kinds of things that you create once. And there's a lot of effort up front, but then it starts to pay dividends or, or residuals if you will, or royalties, if you will, on an ongoing basis. So now all of a sudden I've leveraged myself a little more. And then there's the top tier. Now the top tier.

Is what I call portfolio.

Portfolio income. This is the thing that most people think about when we do this, but it's really the most leveraged income. This is coming from investments like ETFs, index fund stocks, possible annuities. I'm not a fan.

You know, dividend paying stocks. But you are investing in paper assets, if you will. Okay, you're investing in paper assets, if you will. That can pay you gains, pay you dividends, pay your royalties, pay you distributions on a, on an ongoing basis. Very little effort. So what how this starts to play out is to understand that the more I can have assets, residual and portfolio income, the less effort I have. It doesn't mean no effort and it certainly doesn't mean set it and forget it. It doesn't mean to turn your back. It just means that it doesn't require your daily running on the treadmill. Now let me give you a real, a real for instance and how this played out in my life. Many of you know that in 2019, they found what they thought was a 5 centimeter tumor in my bladder. Turned out to be 7amps down. @ that time they were concerned that they would have to remove the prostate, they might have to put a bag and a tube in for the kidney, and that there was a risk of me losing my bladder as well as frankly, it's cancer risk of me losing my life.

And so I had my money machine built.

Now I was making a living by doing the bottom two. So if we look at this.

I was making a living down here.

I was making all of my income down and active in business. So literally 100% of my lifestyle was funded by that. Now the reality is that I still had assets.

In my machine. I still had residual assets that are generating income, and I had portfolio assets generating income. But what it was doing during that time is literally I was having all of this income funneled back in to grow it even more because I didn't need it. This was paying, paying my way 100%.

Well, when we got the diagnosis, I realized that my life had changed. I had to fight. Now.

The way I was going to fight was to be 100% in the game. That meant shut down the stuff that, that required a lot of my time so I could spend that time fighting the battle. So I shut down the businesses, I shut down my active income. I basically says, said I'm not traveling, I'm not doing these things. I am focused on beating this doggone thing down. And so what we ended up doing is taking, taking that income that was down here, okay? And instead of it paying for 100% of our lifestyle, it paid for 10% of our lifestyle.

And then taking the income that was up here and instead of it building the machine as fast as it was, it paid for the remaining 90% of our, our lifestyle. And we just kept on living. It was spitting out cash. The machine wasn't getting smaller, it was actually growing because of the way it was built, it's. Well, how we talk about doing it in the building the money machine. But now what happened is it gave me my time back to fight the. The battle of the cancer. Because I truly don't know how someone does it to sit back and say, I have to. I have to spend my days making a living and spend my nights fighting for my life. I didn't do that. I don't want you to have passive income. I want you to have leveraged income. Because passive doesn't. Doesn't work, but leverage does. And when you build it right, you build that money machine that gives you a life of choice. It gives you a life that you can sit back and say, it's work optional. That you can look at it and say, no, I don't want to do that. It gives you a life that instead of feeling like you have to do something, you get to do something. And so I want to wipe clean this idea of passive, because it doesn't exist. It's just that the level of effort is going to go down. And these are the five tiers of the five levels that you can. You can play in. And ultimately, if you. In the end, where I want you to be is to build a money machine where the money machine is built off the top three levels, asset, residual, and portfolio. And that money machine can generate enough income to at least pay 80% of your lifestyle or more. Mine will pay for more than 100% of our lifestyle. So we're good. And when you do that, now, you're free. That's the game we're playing. That's what I want to light the path to for you. Remember, I'm on a crusade to light the path to financial freedom for a million families. And you're part of that journey with me. I hope that this helps. I hope this puts a new perspective on the idea of passive income and all the junk that you see people spewing on TikTok that aren't living it and it isn't the reality of their life and that you can sit back and say, all right, so how do I make that happen? And we're going to talk more about that in some upcoming episodes and videos. So stay with me on this journey and let me know if you've got any questions. But I look forward to seeing you on the road as I'm speaking, or on another episode of the Affluent Entrepreneur Show. And until we get a chance to do that, as I always say, always, always strive to live a life that outlives you. Cheers.

Thank you for listening to the Affluent Entrepreneur show with me, your host, Mel Abraham. And if you want to achieve financial liberation to create an affluent lifestyle, join me in the Affluent Entrepreneur Facebook group now by going to melabraham.com group and I'll see you there.

And that's it for this episode of BUILDING YOUR MONEY Machine where we help you learn how to master your money, eliminate financial stress and live a life of choice. If you found this valuable or helpful to you, here's what I'd love for you to do. If you do me a favor, go to Apple, Apple Podcast or wherever you're listening to this podcast and rate and review the show. It helps us tremendously to keep us at the top of the list so we can continue to get this information and this message out to people because I truly believe that financial freedom is your birthright and I want to help each and every one of you claim it. Thanks so much.