Hi Phillip, You must be thinking I’m crazy. Who will avoid making money? I will. Let me explain… Instead of making money, I prefer to invest my time in building a passive income. What’s the difference?
Making money is one-time. Passive income is recurring. Some friends and relatives ask me why don’t I help people to create websites, since I can code. You see, creating a website for people will earn me some money, but if I use the same time to create a new system, that system can earn me recurring income for years.
Let me give you more examples to further illustrate the difference. Trading stock is making money. Building a portfolio of stocks for dividend and long-term capital gain is passive income. Promoting an ebook is making money. Promoting a membership program with recurring commissions is passive income.
Having been in the internet marketing niche for more than 10 years, I have seen gurus come and go. One problem with many gurus is that they focus on making money. They may make a lot of money initially, but when they get tired or lazy, their incomes drop quickly. I focus my time on building a passive income.
Although my earning is slow initially, they add up over time. At times when I am lazy, my income may shrink but very slowly. That gives me enough time to take a breather and continue building my passive income. So, while you’re focusing your time and energy on building your business, be mindful of whether you are simply making money or building a passive income.
From time to time, I have friends and relatives coming to me asking for advice. “Kenneth, my company has a bad debt of $30k. What should I do?” “I really don’t have time for my family. My last customer often leaves late at night, why can’t my wife understand me?”
“I need $4000 to pay a legal fee, this is the final warning. Can you help me?” Honestly, I don’t have a solution to their problems. I have had similar problems before.
When this kind of problem happens, you can only manage it, you can’t solve it! For, besides managing the problem, I chose to prevent these problems from happening to me again! So, what is the best way to resolve a problem? To me, the best way is not to let that problem happen at all.
I’m sure you have heard of the saying, “Prevention is better than cure” Most people have heard of it, but they don’t practice it. Let me give you some examples of how I prevent problems. When I was running the wholesale business, most of the payment terms were 30 days term, which means retailers will pay me after 30 days. But some retailers don’t pay or delay their payments. For better relationships, I often continued to supply to them. The end result is, I accumulated a bad debt of $20k in two years.
I still remember one of the retailers agreed to pay me $100 a month, for the $3000 that he owed me. I had to travel all the way to his shop, 20 minutes drive away, to collect it. I did that for a few months and eventually gave up. Yes, I can read books about how to manage bad debt. But what’s the point?
My goal was to achieve time and financial freedom. Collecting bad debt, no matter how effective the method can be, was not something I want to handle. My solution? I avoided a wholesale business together so that I will not have to handle bad debt at all.
Another example.
I have had a financial crisis before. In my worst time, I had to surrender an insurance policy prematurely to take back $9000, so that I can use the money to pay bills. How to NOT get me into a financial crisis again? I saved and built a reserve.
I now have a reserve equivalent to 2 years of my expenses. This means if touchwood all my income stop, I can still pay my bills for two years. I reckon 2 years should be enough for me to restart from the ground. Another thing I did to prevent myself from getting into a financial crisis is that have income from different sources. It is highly unlikely that all my income will stop at the same time.
I may sound like a coward but I’m happy with this ‘chicken-out’ mentality. As much as possible, I will put myself in a position where I can avoid potential problems, so that I only have to focus my time and energy on creation and progress. To your success,
Kenneth
