The Need for Passive Cash Flow

I’m sure you’ve noticed by now, but I am a huge proponent of obtaining passive cash flow.  Passive cash flow is the way that you get to financial freedom, it’s the way that you get to financial security, it’s the way you get to financial independence, and if you have a plan in place and you are willing to delay instant gratification, then you can easily achieve financial freedom. 

It’s not necessarily an easy road although a plan will certainly make the journey easier.  It takes time, it takes perseverance, and it takes sticking to your plan.  Reaching financial freedom also requires that you stay motivated and consistent.

It’s important to create your own investment thesis, which should help you be consistent in making your plans and decisions related to the deals that you are looking for.  And your investment thesis helps you to stay focused on improving your passive cash flow. 

You may be asking what passive cash flow is, what passive cash flow actually gets you, or how you can access deals that get you durable passive cash flow. 

This is where things get exciting.  The first thing you can do with passive cash flow is cover your life expenses.  Assuming you have active income, then the active income can become gravy and you can use the passive cash flow to cover your living expenses.  Anything you make from your day job can be used for whatever else you may want to do. Once you get to a place where your passive cash flow is covering your life expenses and your annual living expenses, you can analyze your situation to determine whether you want to actively grow your passive cash flow further. 

The second thing that passive cash flow can do for you is it can really help you buy the things that you may want.  With the extra passive cash flow, your could buy new furniture, you could get a news car, or buy electronics.  Whatever it is that you’ve wanted to buy, you can use passive cash flow.

The third thing that passive cash flow can do is enhance your lifestyle.  I’m a huge proponent of using extra passive cash flow to enhance your lifestyle because with extra passive cash flow, you can have a new experience. You can use passive cash flow to take a trip to Africa, go scuba diving in the Caribbean, go skiing in Vail or Switzerland, or visit Euro Disney or Tokyo Disney with the family.  You can even use passive cash flow for flying business class or first class.

A fourth thing that you can do with passive cash flow is to continue building your net worth.  Candidly, this area is where I like to focus my extra passive cash flow.  In addition to enhancing my lifestyle with experiences, I also like building upon my passive cash flow by using passive cash flow to invest in new passive cash flow deals.  Additionally, this is a great way to compound your interest.  If you assume that you invest $100,000 into a deal every year and you get a 10% cash-on-cash return, you would get $10,000 in year 1.  If you take that extra positive cash flow and re-invest it new deals, you can then grow your passive cash flow by $1,000 in year 2 while also increasing your net worth.  I look for deals that meet my return metrics. I don’t just invest in every deal. Sometimes I’m sitting on cash and waiting to find a great opportunity to invest in. But when I do find a good opportunity and one that fits my investment thesis, then I’ll make that transaction in order to grow my passive cash flow and net worth.

The fifth thing that you can do with passive cash flow is build a legacy. One of the things I’m a big proponent of is leaving the world better.  Whether that means being able to provide for my family and helping them achieve, then that’s one of the things I want to do with my passive cash flow.  Ideally, I’d like my family’s life to be a little bit easier. So my goal is to leave it a little bit easier for my children and my future grandchildren. Another thing that it gives me the ability to do is leave things better for the people and causes that I care about.  I want to be able to help family members and friends in their quest to being financially free.  And with the causes I care about, I’d like to assist programs that help people with shelter, water, food, and with athletes striving in both education and sports.  In that way, I can leave a legacy.

Those are five ways that passive cash flow helps you in your life. And I think it’s wise endeavor to be trying to strive to get more passive cash flow and to increase your net worth over time so that you can also cover your living expenses, buy the extra things that you want to buy, enhance your lifestyle, continue building your passive cash flow and growing your net worth, and leave a legacy.

Until next time, let’s continuing growing our passive cash flow and net worth together!


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