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I was in this stage from 2008-20011, but instead of spending my passive income I just kept plowing the proceeds back into my investments. Once you find a purpose for your passive income, you gain more appreciation and motivation. To stay motivated, your passive income is earmarked to cover particular expenses such as vacation, food, clothing, or shelter. You aren’t generating enough passive income to do whatever you want yet, but you know that if you stay the course for X amount more years, you’ll get there. 60-89% Active IncomeĪt this level you’ve begun to taste the sweetness of passive income. If I was still trying to kill it during my 11th year of work without a reasonable passive income stream I’d be depressed because I would need to work another 10 years to get to financial freedom as a less enthusiastic worker bee. But the 2009 downturn really beat my motivation to a pulp.
PASSIVE INCOME VS ACTIVE INCOME FULL
I was in this stage for eight years after college (1999-2007) and it was fine because I was full of energy until 2009. It’s the same idea as paying off your mortgage completely by the time you retire. The trick is to increase your passive income to coincide with the decrease in the desire to work. The need for money and healthcare trumps one’s dissatisfaction for work. Most people in America, if not the world are in this bucket where their job is their only source of income. Stop working and you starve, it’s as simple as that. When you have more than 90% of your total income as active income it’s easy to feel like a slave to your job. 90%+ Active Income As a Percent Of Total Income I’ll share with you some of my thoughts along the way so you get a sense of how the journey feels. The goal is to provide motivational goals for those seeking financial independence.Īlso, be sure to check out my list of top financial products to help achieve your goals and grow your wealth. Now I’d like to quantify a framework of happiness between passive income and active income as a percent of total income. Related: Is Private Grade School K-12 Worth It? The Ideal Passive And Active Income Split So that’s good! Fingers crossed my kids are studious and smart. And I also learned there are need-based scholarships at private schools for families who make less than $100,000 a year per child. There are some great public schools in San Francisco, even though the lottery system is extremely stressful. But I found peace that my worst case scenario at the time was OK. When I first wrote this post, I knew I couldn’t easily send more than one kid to private school in SF if need be. Once I started thinking about my worst case scenario I became hooked on creating better worst case scenarios. With $700 a month left in disposable income after taxes, I’d wait it out until an opportunity came along. Worst case scenario I’d sell my properties and rent a studio for $1,400 a month. But, it felt good knowing I could survive on my own if absolutely necessary. $3,000 a month wasn’t enough to live comfortably in my house in San Francisco. It wasn’t until my passive income hit about $3,000 a month in 2008 when I began to see the stars. I’m already quite disciplined, so to add high expectations from managers only compounded the one more year syndrome.
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The only way to flourish was to work hard and constantly stress about being the best to continue getting paid and promoted. However, I often felt there was NO WAY OUT. When my total income was dominated by active income I was thrilled. Enjoying Life In Hawaii With Passive Income