Hourly Disconnect

A setting straight of the record: Passive Income is rarely passive. You have to work for it. I was thinking of this after yesterday’s post, pondering just how “passive” one is when you’re saving or being entrepreneurial. Not very. So.

My definition of Passive Income is money you receive not directly related to the hourly or daily work you applied to create that income. When you have a paid job, you work hourly, or daily or yearly for your wages or salary. You will receive the money for a specific duty or activity, a narrow range of clearly defined functions. Even if you are a CEO of a company, you are still expected to complete recognized, agreed-upon tasks. If you don’t do them, you’re fired.

Passive Income is about creating the assets that create the money. Those assets might be dividend-paying stocks you own, or you devise an app, or it might be a work of art – music, a book, video – for which people pay you. You’re putting stuff into the better side of your balance sheet in the anticipation that money will find its way to them, and so to you.

Clearly there’s nothing passive about any of this. When you are in the process of writing a book there is no cheque waiting at the end of the month. But you might find a royalty cheque in your mailbox for each of the subsequent thirty years. At that point it’s passive; not when you’re plugging away day after day. It’s income displacement to the future, if you like.

There’s the difference. Passive Income might even mean MORE work than you’d otherwise apply to a job. But you are working towards dependence on your own accumulated assets, not the largesse of an employer.

And the big, underplayed upside is that there is no way you can be fired. Yay.

Pathways to Enrichment


The quest for financial independence has one destination, but many pathways by which to find it.

You might  disagree with this: Although there are tried and true ways of getting from dependence to not, job number one is to find the way that works for you. The fit will determine the outcome.

For instance, buying and renting residential units and houses is a clear way to financial success. The downside is that you will necessarily deal with tenants (good and bad), condo associations, building upkeep, grounds maintenance, cleaning and showing when a tenant moves out and so on. Real estate requires management, which might not suit.

If you want a less head-achey way, you can keep your job and turn down the wick on your expenses. By saving (and passively investing in ETFs and the like) you will eventually have enough so that the job is optional. Although this comes with less aggravation, there will be frustrations around the constant delayed gratification and pressure to keep a lid on your spending – not to mention the fact that you have to keep that job.

Pretty much everything else requires some kind of entrepreneurship. Selling other folks’ stuff. Creating something yourself and selling it. Any kind of trading, by which I mean buying something low and selling it less low. These are active ways by which to (eventually) find passive income. This is the high energy/high reward end of the spectrum. Again, this will definitely not be for everyone.

The encouraging beauty of being here in 2015 is that the available choices are enormous. In the ledges and crevices between my generalizations are niches where people are waiting for you to provide a good or a service that will be your staircase to independence.

Time to start. Let’s do something.

Money and Happiness

Here’s a link to an article I think worth reading. It’s about a man of 35 who reached his savings goal…and is underwhelmed.

Mr Saver/Investor achieved a nice round number milestone, in that he has one million dollars worth of liquid assets. According to his story, he did this with restraint and application. Firstly, he reduced his expenses. Next he saved and invested. And the third (and not explicitly stated) leg of that tripod is that he didn’t give up. Call that persistence.

+ restraint, in that he spent on only what he needed, not always what he wanted

+ application, as evidenced by his being in the stock market at a great time

+ persistence because compounding requires time

Admirable, all.

The one mistake I note is the link he makes between happiness and money. What do you think?

I just became a millionaire…

One Customer At A Time

Customers are fickle animals, unless you are somehow able to tame them.

Taming a wild animal brings the idea of ‘breaking’ a horse to mind, which to a non-equine person like me sounds barbaric. Perhaps I’ll abandon that metaphor.

Actually, I realize now that what I really mean is that prospective customers are fickle. By fickle I mean flighty, unpredictable and/or unstable…as opposed to, say, a solid long-term customer. They sound like derogatory words, but that is not my intent. Until someone decides to pay for something we cannot count on them, which is why selling is difficult. Sellers attempt to turn an uncommitted mind into someone at least willing to give your product a shot.

We ask prospective customers to swap their money for benefits we can only describe, for feelings they can only imagine. Until they experience both the benefits and the state of mind that goes with your product, we are encouraging them to make a bet. Figuring out how they view making that bet is a useful activity.

All of these words boil down to a few clear principles. One is that converting a prospect into a customer might take an instant, or not. The second is that you can count on nothing until money changes hands. The third is that even a customer advocate can be spooked. If the experience of the purchase fails to give them the benefits and the feelings they’re expecting, something’s bound to give.

Perhaps we need a new model of sales, one along the lines of socialization. Pets demonstrate this idea well. When you first bring a kitten or a puppy home, they’re raw. With time, attention, kindness, understanding, patience and food they learn the benefits of living within the household rules. They sacrifice their wild side for the good life domesticity provides.

Because prospective customers are infinitely more wary than your house pets, we need to be especially careful about what we are trying to achieve. Let’s be clear: We want them to have an experience that’s better than what they have now, and we want them to feel that it’s better.

Clarity is the mother of precision.