First off, I want to clarify something right off the bat. It’s very possible to build multiple streams of passive income, but the problem is that people approach this entirely wrong when they first start.
People hear financial experts say you should build multiple streams of passive income until the sum of those monthly streams of income exceeds your monthly expenses. Then you would be all set.
It sounds great in theory so when people get excited and work on doing that, it doesn’t work for them in reality.
Why?
Two reasons.
The first reason is because of the term “passive income”.
From a marketing standpoint, it’s a very seductive term. Passive Income. When people hear it, they equate it with “Easy”, “No brainer”, “I just have to sit back and the money will roll in” so right from the get go, people adopt the wrong kind of mentality.
They think building multiple streams of passive income is pretty easy and won’t require a lot of work.
But you know just as well as I do that’s not the case at all. It does require work, but people automatically put on the “easy” filters on their eyes, so they miss out on all the opportunities to build such streams as result.
To solve that, I want to use the term residual instead of passive. Residual implies that there must be work done up front before you get to reap the results afterwards.
That’s the smaller of the two reasons.
The bigger of the two reasons is the word “multiple” in the term “multiple streams of passive income”. It throws a lot of people right off track from the very beginning.
Right from the get go, they try to think of many ways to build passive income.
Buy a gumball machine and set it up in a store, buy a vending machine and set it up in a school, invest in high yield stocks, put some money away in a CD, etc.
That’s great in theory, but it doesn’t work in reality for most people and I’ll tell you why.
You’re diffusing your power among the many.
What experts fail to tell you is that you should build ONE strong stream of residual income FIRST and THEN leverage that to build multiple streams of residual income.
Many people skip this first step of building ONE strong stream of residual income and try to go directly to the second step but that doesn’t work.
You can’t gain leverage by diffusing your power among many things. Keep in mind that I’m writing this with the average person in mind. If you’re a millionaire, of course you can easily build multiple streams of passive income by making wise investment choices. But the majority of people don’t have a million dollars to play around with.
You have to consolidate all your capital, energy, and focus on ONE area and then maximize that opportunity so you can start to gain leverage on it.
For example, let’s say you try to split your capital, focus and energy on buying a gumball machine and a vending machine and investing in high yield stocks. You’re doing what the experts are saying. You’re building multiple streams of passive income. But since you’re splitting all your resources among many things, your return will be minimal across the board.
BUT, let’s say instead of spreading your capital, energy, and focus around many things, you concentrate on vending machines ONLY. You don’t spend it on gumball machines or stocks.
Instead, you buy one vending machine and you buy a set of drinks and put it in one location. You can then concentrate on observing what kind of people buy the drinks, when they buy, and at what price they decide to buy, etc. You start to gain valuable knowledge that you can then leverage to increase that ONE stream of residual income.
If you find adults are predominately buying from the vending machine, you can then alter your drinks accordingly. Maybe stock it with more Vitamin Water or Gatorade instead of soft drinks. Or maybe you see kids buying it more frequently. Then you can include more soft drinks accordingly, etc.
Once you maximize all the factors, you’ll get the best return, and then you can simply multiply that system across other locations.
Once you’ve maximized that opportunity, guess what?
You can teach others all the knowledge you’ve learned so they don’t have to experience the learning curve. And instead of charging a flat flee for that knowledge, how about giving it away in exchange for 5% of their monthly earnings?
Imagine if you then taught your system to 10 people. In addition to your own residual income stream, you get 10 other residual income streams.
Imagine if you taught your system to 100 people.
Now you see what I’m talking about.
That’s how you focus on building ONE stream of residual income and then leveraging that to create multiple streams of residual income.
You never would’ve been able to maximize and fully leverage that ONE opportunity had your focus, capital, and energy been wasted with doing the same with gumball machines and stocks.
Here’s another example to clarify my point.
If you were a farmer, which option would be the best to pursue?
Option A: Wake up at the crack of dawn and sow the seeds of 100 different kinds of fruits and vegetables across a million acres and try your best to give each crop the attention it deserves – watering it, weeding it, fertilizing it, chasing away animals, etc.
OR
Option B: Focus on a select few crops and give it your best attention. Pull out the weeds, water it frequently, provide them with shade, keep the birds away, give it the best fertilizer, etc.
Option A – you’ll get minimal yields across the board of low quality.
Option B – you’ll get maximum yield of top notch quality of a select few. Then you can sell those crops at a premium price, and then invest that new capital in buying better fertilizer, maybe hire a few more hands, buy a bigger plot of land and now you can then start to grow your business accordingly. All this, simply because you decided to focus on ONE area.
Here’s the problem with today’s world.
It’s a shallow mentality.
People refuse to go deep.
Ideas are shallow.
Advice is shallow.
Conversation is shallow.
Everybody wants it easy. Nobody wants to think about things deeply anymore. It amazes me how some of the books that make the bestseller lists are at the level of 2nd graders, yet have adults heralding it as the best thing since sliced bread.
Don’t automatically accept the pop psychology advice given to the masses or any advice for that matter. Take it with a grain of salt, look deep within, explore it on your own and come up with your own conclusions.
It’s tempting to assume that building multiple streams of passive income is the way to go to financial freedom and that’s certainly one of the ways to do so. But don’t be fooled by the term passive. Think residual. Residual streams of income. Put in a lot of work FIRST, and then reap the results accordingly.
And then once your ONE stream is producing enough income, THEN leverage that to build multiple streams of residual income.
That’s the real way to do it.
