Passive Income Is a Lie (Do This Instead)

Passive income is the most profitable lie that this industry has ever sold you. Now, there are 2 ways that you can make income from investing. One is your own income streams and the other is your loan income streams. We're gonna unpack both of these in this conversation. The place where investors really come unstuck is they simply chase the shiny objects, the high yields, this idea of passive income without ever thinking that they actually have to be involved in how they're managing their wealth business. Now, don't get me wrong. I understand why the idea of passive income is so seductive already. You're probably already busy in life. You're busy in work, you're busy in business, you might have family, and just with all the pressures of everything else that goes on in life, it can just feel really easy. Ah, I'm just gonna have this income. It's just gonna be rolling in like rainbows and unicorns, and it's all gonna be perfect. I'm not ever gonna have to look at it, and that just feels like an easy path to take. And what you're really asking for here is that, well, I want the money without the work. I want the financial success without the financial discipline that goes with it. I want the returns without more responsibility. And when you find yourself asking those questions, well, you're starting to play in the whole get-rich-quick scenario. Let me tell you something really important. A get-rich-quick mentality is the very thing which is gonna sacrifice your long-term results. The number one quality that I've noticed about all the successful investors is total and unequivocal responsibility. not only for getting to where they are right now, but importantly for what they're gonna do next. And an overwhelming responsibility that they are the ones that are in control of their finances and they are the ones that are managing their portfolio. To them, passive income doesn't exist and it can be a very dangerous game if that's the very thing you're chasing. Now, as I mentioned, there are only 2 types of income streams that are ever gonna exist within your portfolio. One is what I call your owned income streams. Now, your owned income streams are the ones where you own the asset asset behind the income stream itself. I want you to think of it like the golden goose that lays the golden eggs. Some good examples of this might be property investing, for example. You own the property, you own the asset, and behind that asset you control and own the income stream as well. And the idea is not only getting the compounding capital growth of the asset, but you're also getting the systematic, methodical income stream just rolling into your bank account year after year after year. Incredible elements to have within a portfolio. The second type of income stream is what I call the loaned income streams. This is where you are renting the income stream. You don't own the asset. A good example of this is we do a lot of lending to properties and to business. And don't get me wrong, we can attract some incredibly high yields. The problem is there's a start date of the income stream and then there's an end date of the income stream. It might be a 12-month term. You get a really nice high yield. We've been getting 15% to 20% per annum returns very, very comfortably and easily. But at the end of the day, the deal ends You get your principal back, you got the return back, but then say goodbye to the income stream. You don't own the underlying asset, and that's why it can only become a temporary measure behind your portfolio. Now, both of the income streams are super important at different phases of your portfolio. You absolutely are going to need both. But understanding the role that each is playing in your portfolio, that's where the true distinction is. So many people are just chasing, well, this high yield, shiny object, all this over here, big returns, yet they chase only that element. But there's nothing solid behind the portfolio. There's nothing that's deep and rooted in the earth that's going to form the very thing, the basis of your financial freedom that you want for you and your family forever and a day. So the big distinction is this: what is the purpose that every element is serving the portfolio? When you can understand the distinction between this, you can understand the job that every single dollar needs to be earning and playing. Let me give you a real-life example of this right now. I was having a conversation with one of my private investors I've been working with for a number of years who I'm helping to grow and scale their portfolio. Now, their portfolio is already worth in the multiple millions right now. Phase 1 of the portfolio build was all about focusing on how can we build those owned income streams, the assets which form the foundation, the bedrock behind their future portfolio. And they've done really well there. They've got millions of dollars of equity sitting in there right now. We now need to focus on how we're going to turn those assets into income streams so we can actually start moving towards creating their financial freedom. So our emphasis has now shifted to our loaned income streams because right now what we're looking to target in their portfolio is creating what I call a profit pipeline. This profit pipeline is something I establish in many investors' portfolios where every 18 months to 2 years, our target is to drop $200K of profit into the portfolio systematically, methodically, on a regular basis. And the whole purpose behind these is provide liquidity and flexibility and lending infrastructure so that we can make brand new decisions around this new set of capital and principal that comes in to help start maneuvering and engineer the portfolio away from just being about assets just growing in value and start to convert those assets into high-income yielding assets that can start to fund the financial freedom. Both elements are super critical in a portfolio, but a lot of people get stuck because they're chasing one or the other. Some people are looking for the shiny objects and the illusion of passive income without taking care of their portfolio. Others just want the, well, I just want to buy something safe and I can hold and put my hands on and just real estate and that's it. And they're missing out on the high yields that can accelerate their portfolio. The key is your focus on building a wealth system, not about buying assets. And that's the biggest distinction between being a strategic investor versus being an investor that dabbles in the market. So before you ever get to start thinking about or asking the question around what is the yield you're earning on this deal, or what is the cash flow return that I'm going to be getting, the first question you have to answer is what is the purpose that this element is serving in the portfolio? How is it fitting in with my overall collection of other assets and elements that I already own to help continually maneuver the portfolio towards where you want it to be going in the future. The most successful investors I know, they're not looking for the shiny object. They're not looking for the new sexy thing or just the high yielding strategies that feel really good to be able to look at on paper. What they're focused on doing is having methodical wealth builders working in the background. The things that seem unsexy, but year after year after year they perform and they become the the bedrock of your future portfolio. Then they add in strategic high-yield strategies that have liquidity positions, flexibility positions, and help to engineer the portfolio. It's kind of like it's the oil in the engine of your wealth machine. That's what those cash flow positions really are. Both are fundamentally essential to be able to build and scale a successful wealth portfolio, especially in this day and age when yields are tight, when serviceability and borrowing capacity continues to keep getting compressed. And with all the challenges that we're seeing that the government is kind of bringing into the marketplace, making it harder for everyday people to be able to get ahead. This is where the architecture of your portfolio becomes absolutely everything. So what did people actually want when they were talking about, I want passive income? What they're really talking about is that I want some income rolling in without my whole life revolving around it. And that right there is still very, very possible when you have the right system installed. But passive focuses on how little that you have to do, where in reality, what you want to focus on doing is having your system doing the majority of the work for you. But what you're still doing is that you're acting as the CEO of your own wealth creation business, and you're checking in on the portfolio and the business to make sure it's being steered in the right direction in the right way. So rather than passive income, what you really want to be focused on creating is designed income, where you've orchestrated an income from your portfolio that is consistent, that is methodical, and every single element is doing a job. The mistake isn't renting and the mistake isn't owning. The mistake is where you're deploying your capital into opportunities where you are not understanding the job and the role that it needs to play in your portfolio. This is where you are making the shift from a random collection of assets where you're not understanding what they're doing to a designed income system. So the thing that I want you to sit with, I want you to look at your current portfolio and answer 3 really important questions. Is this element in my portfolio Is it an owned income stream or is it a loaned income stream? What is the job that this is serving in my portfolio as part of my methodical wealth-building strategy? And number 3, is this element moving me closer or taking me further away from the ultimate financial freedom that I want to be able to create? The question that sits underneath this, however, is how much do you actually need? And this is what we're going to be covering next week when we go to calculate the 4 different levels of your financial freedom figures.