Would You Change Your Investment Approach?
What if you could travel forward in time and meet all your future progeny? You fall in love with all the cute little great-great-grandchildren yet to be born, and you make a connection with all of them.
What if someone told you that how you invest NOW will directly affect the well-being of those heirs in the FUTURE? Would you change your investment approach if you knew your future generations would depend on you? Would you play the speculating game on Wall Street? Would you roll the dice on dicey stocks or crypto?
Investing For Retirement.
“Shoot for the moon, aim for the stars.”
When planning for retirement, it’s better to over-plan than under plan, and the sad truth for many retiring Americans is that they under plan – that is if they plan at all. According to a recent GOBankingRates survey, a full 64% of Americans say they’re unprepared for retirement. Sadly, 48% of respondents flatly said they don’t care.
Your twilight years shouldn’t be spent toiling. You toil your entire working life, so you don’t have to anymore when you reach your 60’s. That’s the dream, but it’s becoming more and more a pipe dream as the sight of septuagenarians and octogenarians serving you at McDonald’s or greeting you at Walmart is becoming far too familiar.
So what’s the difference between those who retire at 50 and those still working at 70… PASSIVE INCOME.
There has been a lot of talk recently about the merits of passive income. You hear about it in the financial press, social media, and YouTube, but do you know what passive income means?
In broadest terms, passive income is income you make on auto-pilot. It’s money you make in your sleep, but there’s a generational gap in what more veteran investors consider passive income and what the young kids think it is.
To the YouTube generation, passive income is money from having your own YouTube channel, garnering a following on Twitch, selling books or podcasts on the internet, hawking stuff on Amazon, or any of a long list of other “passive income” businesses peddled on the internet. It’s easy money.
For veteran investors, passive income is different. The type of passive income they pursue derives from tangible assets – productive real-world assets you can touch and feel that pay their investors while they sleep.
Examples of passive income-producing assets are real estate and income-producing businesses. Owning commercial real estate and collecting monthly rents or owning an income-producing business that produces a high-demand consumer good are examples of productive assets.
To many, buying real estate or starting a business seems out of reach. They can’t imagine acquiring the knowledge or the capital for pulling off such an endeavor, but many investors don’t realize that they don’t have to go it alone.
It’s possible to partner with experts with built-in knowledge and to pool the capital with other investors to invest in these types of cash-flowing tangible assets without the high mental or financial barrier to entry.
Passive income is the secret weapon of the wealthy. It’s how they can retire when they are 50. Luckily for everyone else, passive income investments are no longer exclusive to the wealthy.
Why do the wealthy pursue passive income? To care for future generations and have the ability to walk away from their jobs.
Investing For Future Generations.
The wealthy are investing with an eye beyond their lifetimes. They’re investing for future generations. By investing with an eye on future generations, the wealthy ensure themselves of not only a comfortable retirement but of financial independence now.
That’s why the wealthy don’t gamble on their futures or the futures of their heirs. They ignore speculative stocks and risky cryptocurrencies in favor of tangible assets with a long track record of generating consistent cash flow and reliable appreciation.
Ability To Walk Away From Their Job.
Many people don’t plan for the possibility of not being able to work again. Whether a victim of an accident or downsizing, many people fail to acknowledge the possibility that their incomes can vanish in a flash.
The wealthy, most of whom started in the workforce, recognized early on in their careers they need to plan for this doomsday possibility. In their search to find protection against a loss of income, many investors are inevitably led to passive income alternatives.
Passive income streams that don’t depend on your labor and the number of hours in the day are the surest way to guard against a loss of income. When the value of those income streams reach the level of the income from your job, it’s at that point that you can officially walk away from your job – if you so choose.
The Power Of Compounding.
Passive income from tangible assets like real estate, businesses, agriculture, and oil & gas, can leverage the power of compounding on two levels: 1) Not only does income compound wealth when reinvested, but 2) appreciation of the underlying assets compound returns along with income that wouldn’t be possible with income or appreciation alone.
To fully take advantage of the power of compounding through exponential growth, the sooner you start, the better.
Social Security Is A Dead End.
Social security is a dead end. Not only will your heirs not benefit from social security payments that end with your death, but social security might not even last your lifetime.
Even in the best-case scenario, many who rely exclusively on social security will find themselves disappointed and insufficiently funded once they reach retirement age – that is, if social security is even around. Experts believe social security will “run out” sometime in the next 25 years in the worst-case scenario.
Do not wait until it’s too late to think about creating sweat-free passive income. Make passive income a priority now so your money will have the maximum time to work for you.
Start by educating yourself and then make connections with successful inventors who can point you in the right direction. If there’s a destination you want to reach, talk to the people who have already walked the path to that destination.
Maximize Returns By Minimizing Taxes.
The right passive investments in the right assets can preserve the income you earn dramatically. The highest tax rates are the ones that are on your paycheck. Depending on where you live, the combined federal and state tax rates can reach as high as 50% – cutting drastically into your take-home pay.
Taxes are one of the reasons the wealthy prefer passive income over ordinary W-2 income. Favorable tax law deductions and benefits involved with passive investments allow you to keep a significant portion of your income compared to ordinary income. Real estate investments, in particular, enjoy many additional tax benefits.
Only passive income streams that can be reinvested and paired with appreciation from underlying assets will allow investors to meet their current and future financial needs and the needs of future generations, and those assets are passed on for the benefit of future generations. It’s very much like university endowments that invest for the needs of current students and faculty while preserving assets and income for future classes.
Passive income from real estate and businesses can be had without direct investments’ high intellectual and capital costs. By leveraging the knowledge of experienced investors and making an equity or debt investment in a private fund or partnership, the average investor can enjoy the benefits of cash-flowing assets without the high capital outlays or the time and effort needed to learn about an asset class.
Tapping into a fund managers’ expertise allows you to invest with a fraction of the capital and avoid the headaches of management – making your investment truly passive.
Choose To Start Today.
You have to pursue passive income actively. It’s not something you can buy on Robinhood.
These private opportunities require research and effort, but the rest is hands-free once you partner with the right experts.
Start prioritizing passive income today and reap the benefits in your life while leaving something for generations to come.
Michael Foley, president and CEO of Humabilt Capital, oversees the entitlement process, funding, and operations for Humabuilt Capital. Mr. Foley has been a full-time real estate investor since 1995 during which time he has developed hundreds of single-family homes, townhomes, condominiums, and apartments. Mr. Foley started his investment ventures in Long Beach, California, and has expanded to Apex and Durham North Carolina. Mr. Foley is a graduate of the University of California at San Diego.