Second Step Towards Financial Freedom

Second Step : PASSIVE INCOME

After accomplishing the First Step of "ASSET CREATION - ASSET BASED INCOME". Second Step belongs to creating PASSIVE INCOME. Once create an asset based income, it is very important to convert it into passive income. REMEMBER : All PASSIVE INCOMES are ASSET BASED INCOMES but not all ASSET BASED INCOMES are PASSIVE INCOMES.

Now, to start with, first you must understand, there are two types of incomes :

1) Active Income

2) Passive Income

ACTIVE INCOME : Active Income is the income which depends upon your availability at workplace. As the name suggests, Active Income is the one which depends upon your active hours invests at work. It depends upon your presence, activity, activeness etc. AS LONG AS YOU ARE PRESENT, AS LONG AS YOU ARE WORKING, YOU WILL GENERATE INCOME BUT THE MOMENT YOU GET ABSENT OR STOP WORKING DUE TO ANY EXTERNAL CIRCUMSTANCES, YOU WILL NOT GENERATED ANY INCOME. For example, if you stop going to your office, your income will stop. You'll get paid by your regular presence in your office and regular activity you are doing at your workplace. The moment you stop working or unable to go to your workplace, you will not get paid. That's why a 25 years old one or 55 years old experienced one has to go to ones office by waking up at 8 am regularly, 5 days a week in order to get a pay check at the end of the month. If you got absent without any prior notice, your income will get deducted. NO WORK NO INCOME. Here, Man works for money. You trade your time each and every day in order to earn money. YOU TRADE YOUR FREEDOM FOR FREEDOM. And, the moment you won't be able to invest time at your workplace because of any circumstance or emergency situation, you will not get paid. YOUR MONEY TOTALLY DEPENDS UPON THE TIME YOU ARE INVESTING AT YOUR WORKPLACE. People who falls into this category of earning ACTIVE INCOME are EMPLOYEES and SELF-EMPLOYEE.

An employee or self-employee (CA, CS, Dr., Lawyers, single franchise owner, shop owner etc) must go to his/her office or must sit in front of the laptop in case of Work from home, every morning, whether he/she loves his/her work or not, till he/she gets retired. It's the obligation, it's the necessity for all these people. You know why ? Because if they don't work, they will not earn a single penny because during their absence there is nothing which will work in their behalf (They don't have any asset working for them). In jobs, you don't have any chance of creating your own asset because you yourself are being used as an asset by your organisation Or in self-employement, you have your own asset but your presence is very much required in order to make money out of it because it's only you who is running your asset. For example - If a practicing CA stops working due to any circumstances, he/she will not earn a single penny if his/her only source of income comes from practicing. A shop owner will not earn a single penny in a particular day, if he/she not open his/her shop. Self-employed person is different from an employee only in just one way - An employee has to report to his higher authority or he/she has his/her boss but a self-employed is his/her own boss. But still they both earn an ACTIVE INCOME because there presence is must in order to make money. the moment they got absent, no money will flow into their bank account.

If a person works 8 hours a day on an average, then he/she will get paid for only those 8 hours. Rest 16 hours, you earn nothing if you are earning active source of income. It means you just wasting those 16 hours or 2/3rd of your day. Ultimately, wasting intentionally or un-intentionally 2/3rd of your working life.

Wonder, why so many people lost their jobs during this COVID-19 times ? I think you got the answer for this question. Around 25 crores people lost their jobs because they are earning ACTIVE INCOME. NO WORK NO MONEY. The main problem is they are not creating any asset for themselves, which in the times of crisis, work for them and generates regular cash flow into their accounts, when they themselves won't be able to work. THIS IS THE ONLY REASON, WHY MOST PEOPLE GOT UNEMPLOYED. But, what is more shocking is that they are still looking for a job instead of creating an asset which can solve their problem permanently. Remember : Job will leave you when you need it the most but an asset will support you during the crisis.

PASSIVE INCOME : Passive Income doesn't depends upon your availability. It doesn't depend upon your activeness, activity at your workplace. As the name suggest you will earn money even when you are doing nothing for it. Here, Money works for Man. You will no longer trade your time each and every day to earn money, instead you convert your asset into a system which will generate money for you 24*7 for 7 days a week, forever. In this case, if you stop working for sometime deliberately or due to some unusual circumstances, Money will still flows into your account. You presence is not necessary at workplace or you are not obliged to work to earn money.

Difference between ASSET & SYSTEM ?

An asset gives you an Asset Based Income (1st milestone towards Financial Freedom) but in order to move further along the way towards the final destiny, you need to convert your asset into system, which gives you Passive Income. In order to operate an asset your presence is required but the moment you convert your asset into system, then your presence is not very much required to operate it. Let me give you an example : Mr. Ray Kroc, Owner of McDonald's, at the age of 57, start working on his dreams. He opened a single store called McDonald's, at this point of his initial career, he works for money. When the store gets open, money comes in, when store got closed, money stops. So, he has started his business journey from being a self-employee. At this point of time, his assets were in terms of products (food) & services. But his presence is required to run his only store or to operate it. His activeness is required. To overcome this problem, Mr. Ray Kroc converts his asset into system by creating multiple franchise of McDonald's. Now, at present McDonald's has around 40,000 franchises around the globe other than the original one. Now, if his original store stopped working, still his 40,000 franchises are in operation, which will bring money into his pocket without working for a single minute. Let say, if 1000 franchises gets stopped, still 39000 franchises are working for him to generate regular cash flow for him. That's called the system of franchises. Mr. Ray Kroc is no more with us right now, but his well establish asset converted into system is there in this world till the end, which will continue to make money for him even after his death. And, we are enjoying his burgers and his family is enjoying Financial Freedom. This is called PASSIVE INCOME. People working in McDonald's earning Active Income but the owner Mr. Ray Kroc is earning Passive Income. People working in McDonald's will earn money till they continue to work there, if they stop working they will not get paid but Mr. Ray Kroc still earn huge lump sum of money even after the death.

A self-employed person is successful in making an Asset for him but a failure in converting that asset into a System, due to which after creating as asset he/she still earns an Active Income with no security.

Let me give an another very simple and understandable example : During the ancient time, when people don't have fan in their homes, they used to wave their hand or paper made fan (Asset) in order to get air. But, as long as they wave their hand or paper made fan (Asset) they will get air but the moment the stop waving their hand or paper made fan, air will also get stops.This is what the Active source of getting Air. Now, We all have fans or AC (system) in our homes. At this time, while you are reading this article, you are not making a 1% effort in getting air because your fan or AC (system) doing this for you and you are enjoying the cool air. Now, during the night, while you are asleep, your fan or AC (system) is working, while you are watching TV your fan or AC (system) is working for you to give you cool Air, your efforts are not required in order to generate air, this is called Passive Source of Air. Now, the question in front of you is that, do you have any system for generating passive money like you have fans or AC to generate passive air ? If your answer is NO, then what you are doing right now in order to create the system for money.

Imagine, if the company of the AC or fan you are using restricts you to function your AC or fan for only 8 hours a day, how your life will become ? If you are living in DELHI, then it surely become a HELL because without AC you can't live. And, without fan you can't live anywhere on this planet nowadays. So, why you are living only on the income which you generates only in those 8 hours ? Think like this way, and you'll get the permanent solution of the your problem. Why restricting yourself to earn against only 8 hours a day and not 24 hours a day just like getting air 24 hours a day ?

If you are thinking that creating an asset or creating a system is not your cup of tea, then don't complain about your financial stability. Don't say you lack money. Because this is what going to happen as a result if you are not making an asset or converting it into system. Remember : The ability to work, in case of human, decreases with time, that's why you will get pissed out off (retired) your organisation as you reached 60 years of age but the ability to work, in case of an asset or system, increase exponentially with time, your asset will never grow old with time. It get even younger and energetic as time passed by.

In order to earn money, work has to be done, that's right but wait, there is not a single book which says (except schools or colleges), you must have to work in order to make money. It's not necessary for you to work all your life to make money. But, yes it's very much necessary for you to work all your life to get a paycheck at the end of every month.

Our education system won't teach us about Passive Income (A system generating system), it always teach us about the Paychecks or Active Income (work, work, work till life ends to earn money). Get rid of this philosophy and don't be a slave of your own mental blocks, learn new things, do new things, and create your own financial freedom. Don't stop learning. Creating listening skills. Think like the RICH, work like the RICH & live like the RICH.

Any one can make his/her own asset (To know more read my previous article - The First Step Towards Financial Freedom) and can convert it into system to make regular cash flow as much as you want. You can also reach out to me, if you need a solution.

To know more about how to convert asset into a system, stay connected.

Till then create Asset Based Income first and achieve the First Milestone towards the Financial Freedom.

Thank you.

.