A few days ago, I wrote an article relating to why most people need to eventually convert your active to passive income
at the end of the day.
There are a few good arguments here and there that surrounds whether we need passive income in our lives but I think most people are in consensus that they need some sort of passive income, even if it’s just a small part of it.
You see, it all started with the fact that time is a finite resource.
You can’t be in the East on one side and be present at the same time in the West because your physical presence can only be at one point in a single time.
Technically, that means that if your earned income are based on your presence and services that you provide, you can only earn a limited amount that is capped because you are restricted by your movement and time.
This can be possible of course, that is if you are able to improve your service per hour massively over a number of years that you have been trained for.
Take for example, the renowned footballer of the year, Cristiano Ronaldo – a player whose illustrious career with Sporting Lisbon, Manchester United, Real Madrid and Juventus takes the world by storm.
Cristiano started his career with Lisbon at the age of 17 when he was earning around £18,000 per week.
He worked so hard in his career, came early for training, stayed back to practice on his set pieces and after years of hard work he was rewarded with an illustrious career move to Real Madrid where he earns a basic salary of £365k per week.
That is some crazy compounding annual growth rate if you do backwards accounting.
|Cristiano’s Salary with Real Madrid
By the same nature, there are some of you who are very good at climbing the corporate ladder because you are so good at what you do.
You worked hard for the project that you’ve been assigned to, you sacrificed your weekends to commit yourself to meeting the deadline and you’ve built great relationship with your peers and supervisors.
All of those amounts to efforts that you’ve diligently built from scratch and maintain them.
Improving Your Cashflow By Working On Other People’s Time
While the above is an exemplary of what we can learn, there is a better option and that is by enhancing your skills to work on other people’s time.
What exactly do I mean by that?
An entrepreneur, whose work surrounds setting up a business or company providing services or products in the hope of earning a profit, builds on a premise that in order to bring his business to the next level, he must hire people to do most of the groundwork operations while he uses his time to scale his businesses strategically.
The teams he employed are churning out the cashflow for his company on his behalf while he seeks to find another cashflow stream.
There are inherent risks in entrepreneurship but you can see where I am coming from with the analogy.
An investor who invests in properties at a decent valuation as an owner is able to rent out his premise for rental income while waiting for capital gain appreciation in a few years time. In this analogy, the investor is using the lessee’s rental over time to pay off the mortgage over the next 30 years.
Similarly, a shareholder who owns the right to vote in the company is technically an owner by nature and he earns the right to receive dividends from the profits of the company by allowing the management to manage the thousands of employees employed within the company.
In all the examples above, it exemplifies the magnitude of improving the revenue earned per hour and productivity increase.
The idea is to be able to get to a stage where you aim to earn what you did today but with a much better resource allocation of time.
Ensuring a positive cashflow under the utilization of time productivity is the essence of a true financial independence recipe.
Thanks for reading.