Define Asset Income
There is a consensus that financial freedom starts with saving enough to cover most emergencies and avoiding the use of credit.
However, the long-term definition of financial freedom that is associated with wealth includes the accumulation of income-producing assets.
Asset income can be in the form of revenue, dividends, profits, or interest. These types of asset income are not related to a paycheck job. So, I will identify a few options and why you should consider these in your quest for financial freedom.
Learn to Earn Beyond a Job
The rent, transportation, and utilities demand our attention and a paycheck to fund them. But your long-term planning must include more than a paycheck to realize some financial peace over your lifetime.
Asset investing is foreign to most of us when we are young, unless your parents share their experiences for building assets by investing.
There is a lot to learn when it comes to investing. Seek out advice and insight from successful investors, especially those who invest in the assets you want to seek out.
You need to know what makes a good investment. And it helps to know the potential cost to benefit related to different types of assets.
Capital Ideas
Your investment amount is referred to as capital. An asset will require capital to purchase, maintain, or operate to generate a return or profit. Your capital is put to work.
Capitalists get a lot of bad press due to greed. And, if you have been laid off due to cost cutting decisions, you have experienced capitalist decisions for better profits.
It is a capital idea that you must learn how to invest and shelter your household from employer decisions made to cut labor costs.
Your long-term goal should be to get enough asset income so that a job becomes optional.
So, let’s consider a few more capital ideas.
Companies Need Capital
Companies sell stock to raise operating capital in exchange for part ownership. And, they often raise capital by selling bonds and paying interest over a specified period, like a loan. There is plenty of information available about how that process works. Make this a topic to study.
The risk of loss related to stock ownership and bond investments depends a lot on how profitable a company is and how well it is managed. Learn how to define and discern both before you invest.
Many will advise beginners to ease into stock investing with a paper investment before a money investment. By that, I mean you can pick ten to twenty stocks and pretend to purchase ten shares of each. That would be a lot more money than you would want to risk at first. However, you will learn some valuable lessons if you do this for at least three months.
You will learn about how individual stocks react to changes in the overall stock exchange. If your selected stocks are from a variety of industries and company sizes, you will learn why you must diversify your stock investments.
Some stocks will do better than others. Then, by reading investor news or looking at the financial statements, you will learn more about profit percentages, stock price to earnings ratio, the effect of management decisions, the volatility ratios, and the effects of major announcements related to the company or their industry or the economy.
That exercise on paper will give you some insights and confidence about where to invest actual money toward stock investing. With actual money in stocks, your study will take on more intensity!
It is fun to see smart investments grow in value. The hard part is reading about the changes in the market and keeping steady when prices go down. Knowledge of the company behind the stock investment will give you confidence that the price will come back up. Enjoy the ride!
Land Is a Resource
Land is a great long-term investment with many options for generating income. Although, the upfront investment can be difficult to accumulate. And it will require more of your time and attention to manage.
Farmers make their living off the land. If you own acres of land, a farmer might be willing to rent your land for pasture or hay or crops.
If you have land, you could rent it for events, cut lumber to sell, build a pond for fishing, raise animals for food or sale, grow vegetables or other crops, and the list goes on.
Other options for land include various forms of development. A couple of developments in the cash cow category include storage units or an RV park. It would take a lot of capital, but the returns could last a long time.
Rental property or houses for sale start with land. Use it and take care of it and it will make your investment worthwhile.
Sales and Rentals
Whether it is houses or equipment or vehicles, they become assets if you can buy to sell or rent them. They can provide income.
Imagine setting aside money as a pool for investing. One option is to buy an item at a cheap price that you know you can sell for a profit. Used car dealers are a good example. I have known several people who could do auto repairs that were able to buy cheap and sell a repaired vehicle for a decent profit.
Pay attention to small businesses. You might find a way to do a small-scale version of that on a part-time basis.
Other Ideas
Beyond a second job for part-time income, there are ways to invest that can prove more beneficial to building financial independence.
One idea is a self-service laundromat. The cash flow is good, but equipment must be maintained. Some owner involvement to make sure it operates well for the public.
If you were willing to manage the process, you could build a service company on the side. Capital for equipment, of course, by the owner. Then, you could hire others to run the service part. Of course, turnover might be an issue. That could include a lawn care business, a cleaning business, or a property management business.
Big Dreams Waiting on Capital
Start simple. Save ten percent of your take-home income. Pay yourself first.
Be consistent. That is the key.
Set goals. Celebrate the victories. Your first goal must be to relieve the need for using credit, with at least $2,000 in savings for emergencies.
Second, save enough money to relieve the concern for a job loss. With a potential for six months to find a new job, have six months of living expenses in reserve.
Third, pay off debt until you can afford to pay off ahead of schedule or pay off entirely.
Fourth, start fully funding a retirement account. You will have to study the current limitations.
Fifth, start a fund for investing. This will be your capital fund. The fund you will use to buy assets that can generate income for a long time.
Sixth, build asset income until a regular job is optional to you.
Those are worthy goals. Goals that are waiting on your capital!