Passive Income: The Road to an Early Retirement

early retirementMost of us are very familiar with earned income these days. We have a job where we have to put in X amount of work to earn X amount of dollars. Then, we save a small portion of each check into an investment account so we can retire when we’re in our late sixties. It’s the common plan, and most people don’t think twice about it (even though it’s not really working that well today).

So what’s the alternative? Passive income. By working on a certain task today, you may ensure yourself a paycheck for the rest of your life, even though you don’t continually work for it. This is the basis of passive income. I realize that the explanation might still leave you puzzled, so let’s take a look at an example. A song writer comes up with a great piece that is purchased and sung over and over for the next 20 years. Each time the rights to the song are purchased, the writer gets a cut of the profits, but they only had to write the song once. This is passive income in a nutshell.


So How Can Passive Income Lead to an Early Retirement?

There are many different forms of passive income: real estate, selling insurance, network marketing, franchising, and even dividends. As long as you develop a system and are able to take yourself out of the business, anything could potentially be a source of passive income!

The real question though, is How could it lead to an early retirement?â

Let’s imagine that you save up your pennies and you’re able to buy your very first rental property with cash! You find a renter immediately and are earning $750 a month on your $80,000 investment. With your regular savings of $1,500 a month and your additional $750 from rent, you soon find that you’ve earned another $80,000 after only 3 years!

Since the first real estate investment worked out so well, you’ve decided to purchase another property and rent that one out as well. Now your rental income is $1,500 plus your regular savings of $1,500 per month â“ this allows you to save at a rate of $3,000 a month! It will take you just over 2 years to buy a rental property this time, and then your income will be $3,750 per month.

If you have 20 years before retirement and you institute this passive income mentality, you could create   a regenerative income that’s beyond your wildest dreams! You might not have $2,000,000 sitting in a 401(k), but you will have over a million dollars in assets, plus you’ll have an income that’s $100,000 per month! I would take that scenario over a slightly larger chunk of money any day.


What Is Your Plan?

If you’re nearing retirement, hopefully you’ve had a plan in the works for a while. If you are still young, I would encourage you to develop a passive income any way that you can. If you have any questions about what might be possible, be sure to send me an email. I would love to help in any way that I can.

(This guest post has been written by Derek from  Creating a Passive Income. Not only does Derek enjoy writing about passive income, but he also makes an effort to create it in his every day life! Be sure to  subscribe to his website  if you’d like to discover some new forms of passive income that you’ve never thought of before!)