Acquiring multiple streams of income -Robert Kiyosaki, author of the excellent book Rich Dad Poor Dad, outlines three types of income and can be summarized by the following : Earn income, Portfolio Income, Passive Income.
Earn Income refers to the income from your direct labour. It involves the time and effort you put in, in exchange for a salary or a fee. Earned income is the most difficult to earn because it depends on how hard you work. It is difficult to acquire more earned income without increasing the number of hours that you work. The problem with earned income is that if you stop work then that income stream dries up. This is a problem you will be faced with in retirement.
Portfolio Income is the return from your investment. It comes in the form of an interest, dividend or even capital gain. It is based on leveraging your existing asset to make them work for you.
Passive income usually comes on a regular basis from the work done earlier. It comes in a form of royalties and rental etc. Are you planning to have enough portfolio and passive income streams to support your lifestyle in retirement once your earned income stream stops flowing?
Where is your largest source of income currently coming from? If it’s earned income, what happens if you lose your job? How long can you survive?Most people think that losing their job happens to someone else. What about if you become ill and can no longer work? Who looks after you then?You must assume that any source of income could dry up at any moment. Having multiple sources of income helps protect you against the potential impact if this occurs. It is not being greedy, it is something you should seriously consider as part of your retirement plan.
Cheers,
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December 13th, 2008 at 6:08 am
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