Creating Multiple Streams of Income
In his book "Multiple Streams of Income: How to Generate a Lifetime of Unlimited Wealth", Robert Allen, discussed the importance of generating residual income. Residual income (also know as passive or recurring income) is defined as income that you continually receive or generate even after the initial efforts have been expended. In order not to confuse this with the other definition that states that residual income is the income an individual has after all expenses and debts have been settled, I'd like to use the terms "passive income" or "recurring income" instead.
Passive income definitely qualifies as smart money. It is income that you generate without requiring much of your time or presence. In the book, Robert Allen discussed three major markets where in you can get this kind of income. And he said that all these can be achieved on a part-time basis, working right from your own home, using little or none of your own money, or with few or no employees.
In the next section, I will enumerate these streams of income sources which anyone can use to earn passive income.
THE THREE GREAT MONEY MOUNTAINS
According to Robert Allen, the 3 Great Money Mountains are: The Stock Market Mountain, The Real Estate Mountain, and The Marketing Mountain.
STOCK MARKET MOUNTAIN
To be a successful investor in the stock market, Robert Allen suggests that you learn how to filter out which stocks to buy (FILTERING), know when to buy (TIMING IN), and know when to sell (TIMING OUT). With the multitude of data present in dealing with the market, this may sound overwhelming, but the author also simplified it more for all of us. He said that the easiest way to invest in the stock market would be to start investing right away (TIMING IN), invest in Index Funds which are the safest and simplest way to invest (FILTERING), and to invest for the long-term (TIMING OUT). He suggests that you invest for at least 10 to 25 years in the process quoting billionaire investor Warren Buffett in saying "My favorite holding period is ... forever."
A little more advanced strategies that he introduces are:
- Following the strategies or letting your funds be managed by time-tested brilliant investors like Warren Buffett.
- Choosing mutual funds with the best long-term track records.
- Choosing financial advisors with the best long-term track records.
- Considering high-powered sector funds (Financials, Property, Mining, etc.)
- And lastly, he recommended but with great caution, to try doubling your money by investing in stock options.
REAL ESTATE MOUNTAIN
In order to make money in the real estate business, one must learn to do the 3 F's - FINDING, FUNDING, and FARMING. Finding involves finding highly motivated sellers and making sure that the property for sale is a good deal. Next you'll have to know how to finance bargain deals by looking for funds. And once you've funded it, it's time to sell it and harvest your profits (Farming).
Robert Allen suggested 2 simple ways to be successful in the real estate market.
1. Buy and Hold with the intention of becoming a Landlord. (He doesn't recommend buying empty lots. He prefers lots with infrastructures that you can rent out.)
2. Flipping properties with the intention of buying them below market price and reselling them in the short-term for a quick profit. (Foreclosures and Flipping strategy)
The author recommends buying one property per year to hold into your long-term portfolio and flipping at least one property per year for short-term income.
THE MARKETING MOUNTAIN
Robert Allen referred to the Marketing mountain as the Business mountain. Here we are required to sell something in order to earn an income. He mentioned four businesses where this can be effectively applied - Internet business, Network Marketing, Licensing, and Infopreneurship.
Infopreneurship is about selling information. There's a lot of information available for everyone to use but not every information is packaged properly. Your goal should be to sell information that everyone want to know about and package it properly so you can sell it. This has become a tremendous hit in recent years because more people value their TIME. We want information we can use and we want it fast. Most common practices are to publish books and e-books and sell them in the market.
Network marketing is also referred to as Relationship marketing. Most common these days is probably what people refer to as Affiliate marketing. In affiliate marketing, the company selling the actual product pays you for customers that you bring or introduce to them.
Harnessing the internet as a tool to generate residual income is also one of the Robert Allen's advocacies. The internet has revolutionized marketing and selling by lowering cost. It is also available 24 hours a day without needing much care and maintenance. It is a powerful technology that one must harness. To be successful in it, he recommends automating everything and marketing or advertising to generate traffic.
MONEY WHILE YOU SLEEP
Robert Allen highlights the importance of investing in each money mountain and generating several income streams from each mountain. Although this sounds simple enough, he also forewarns that while there are hundreds of separate moneymaking techniques and formulas for each money mountain, it can possibly take years to learn and master them. In short, this is not quick money. You still will have to put in your time and effort to make this work. But the good thing about these income sources is the fact that after you've put in the initial effort, money can start coming in even when you are sleeping.
Money Magnets, let us all learn from this and apply it in our lives to generate multiple streams of income and become financially free. The closest person I know who is doing this right now is no other than our very own Bo Sanchez. Let's learn from him and follow his footsteps. (^o^)/
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