Most people exchange their time for money. Their entire compensation package is determined by the number of hours that they work in a given week. Typically, an hourly wage is set which is multiplied by the total hours worked during that time period. The standard in this country is 40 hours with overtime accumulated after that. One's complete paycheck is contingent upon them showing up for work. Miss a day of work and there is no pay earned without sick time.

Another common pay plan is a salaried position. This is similar to the hourly except the pay rate is the same each week regardless of the number of hours worked. Overtime is usually not available in this scenario. Unfortunately, most people end up working more that the normal 40 hours under this plan. Companies put so much pressure on employees to increase production that the time spent working seems to lengthen with each passing year.

This is the common mindset that is instilled in all of us growing up. We are taught the we are to do well in school to get into a good college. Once there, high achievement is stressed so that we can get a good job with a decent salary. When we accomplish that, the pressure is to work hard so that we can advance to higher ranks within the organization with an associated increase in pay. Finally, we can retire after a productive career and drift off into our golden years.

Unfortunately, in this era, this concept is not realistic. Although the educational system still prepares us to get a job, the lifetime employment with the same company is bygone. People typically work for numerous companies during their careers. Massive layoffs are well documented. Loyalty either from the company or the employee is almost non-existent. Oftentimes, people are caught in financial hardship due to unexpected changes in circumstances.

How does one get ahead? It almost impossible to attain financial abundance when exchanging time for money. The reason is simple. There just is not enough hours in a week to work to make it profitable long term. Eventually, there is a cap on one's earning potential due to the time limitation. Couple this with the fact that taxes take a greater percentage the more that is earned and one quickly realizes that it is a fruitless proposition.

The key is in the concept of passive income. Basically, passive income is money acquired without you “directly“ working for it. It is income that is not an exchange for time. If work is required, it is done one time with the money flowing in multiple times.

There are two forms of passive income: income derived from business and income derived from investments. Business income is the money that one receives without actually needing to work in the business. One acquires a business that is either run by someone else or is self sufficient. The profits generated are taken out by the owner thus yielding passive income.

Income derived from investments is making money from money. Instead of you working for money, it is putting your money to work for you. depending upon the investment, a rate of return is realized which generates passive income. Examples of this are dividends from stocks, appreciation in real estate, interest on savings, etc...

The wonderful aspect of this type of income is that the money is created regardless of one's efforts. If you don't show up for work, the income still exists. You will earn the same while at work as you would sitting on the beach. In addition, this allows one to increase their overall efforts. If your money is working while you are focusing on something else, you are, in effect, paid twice for your time. It is easy to see how it is possible to create massive wealth under this scenario.

Focus your attention on creating passive streams of income. It holds the key to all financial freedom.

Article Source: Free-Articles-zone

Dennis Harting
©2007

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