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I was listening to another podcast from the BiggerPockets guys and their guest this time around was Natali Morris. The podcast was called Limiting Beliefs That Hold You Back From Incredible Wealth. Although the podcast was interesting, that’s not really the point of this post.
It was something that she mentioned in the middle of it that for some reason really jumped out at me and that’s what I wanted to share. Natali said that when her father was in the midst of his divorce, he was referring to her mom and said:
She got all the eggs, and I got the geese.
It was only a couple of seconds out of a podcast that was over an hour, but I rewound to hear it again. Her mom may have gotten all of their savings, for instance, but her dad kept the vehicles that produced that money, which I’m assuming is likely real estate rentals or some other income-producing assets. Think about that for a second – that’s a really insightful deduction for him to make.
That got me thinking about the importance of having some type of income-producing assets to carry you even if you lose the base of what you already have. In other words, having something that provides you with income on a regular basis even if you run into a major crisis can save your butt.
Assets can also be important to pass on to posterity. I’ve figured out my game plan for financial freedom, but what about my daughter? I want her to know the importance of work and responsibility, but I also want to help her build a sound future. If there’s anything left in my nest egg, that would be great to get her started, but maybe it’s called a nest egg for a reason. It’s no goose and once it’s gone… it’s gone.
But if I pass on some rental properties, now she’ll have recurring income instead. Instead of the eggs, she’ll have the geese laying the eggs for her every month.
If you have kids, this can be extremely beneficial for your children’s future, but even if you don’t, it should still be something important to consider for yourself on the route to retire.
If you’re counting on the value of stocks and mutual funds to carry you and the market crashes for a decade, are you prepared for that?
Look, a lot of people are nervous about real estate – I get that. I would love everyone to understand that it doesn’t need to be as complicated as you might think. It can also be pretty hands-off with a solid property management company. But I get that some of you are dead set against it. Regardless, you should consider assets that produce a regular income whether you’re working or not. Here’s a handful (although there are plenty of others)…
- Rental Property – Whether you like it or not, there are reasons why most millionaires own some type of real estate. This asset class has so many advantages, such as tax deductions (interest, depreciation, repairs, etc.), the power of leverage to buy it with only a portion of your money down, rents that will generally always go up (while a fixed mortgage payment stays the same), etc. This is an asset at least worth investigating. I’m hoping to add another 2-3 more duplexes to my portfolio before I quit the 9-5.
- Business Income – A lot of work generally needs to go into this goose, but if you can build up a business to the point where you can step out of it and still receive income, you’re doing something right! The key to this is that you need to be able to step out of it. If the business directly involves you and you can’t leave it without the income stopping, then you don’t have a goose yet and need to figure that out.
- Dividend Stocks – Don’t focus on the buy and hope strategy that a stock will continue to climb and you’ll sell it at a higher price. Concentrate on the solid companies that have stocks that pay a dividend on a regular basis (usually quarterly). There are some people like Jason at Dividend Mantra who has been working his way toward financial freedom by buying dividend stocks. He’s going to be able to live off the dividends alone… now that’s awesome. I’m definitely not where I want to be with this class, but I’m starting to build it up a little more.
- REITs – If you don’t want to add rental property to your portfolio, another option might be to look at a Real Estate Investment Trust (REIT). A REIT is a company that owns (or finances) real estate and gives investors an opportunity to get into real estate without getting their hands dirty. Most REITs trade on the stock market and pay their shareholders dividends generally comprised of most or all of their taxable income. I have a REIT in my Roth IRA, but since I’m focusing on rental properties, I’m not concentrating on this asset class as much.
- Royalties / Licensing – Although a lot tougher than some of the other options, royalties from books or music or licensing on an invention carry some people for decades. The key is that it needs to be something that consumers want in order to see a reasonable income. I’ve written a couple of technology books over the past handful of years and while receiving the royalty payments is great, technology changes, which means that the books have a useful life and the payments eventually stop. Once of my goals is to write a good children’s book once I quit the 9-5. I’m going to write it because I want to, not for the money. However, if it gains some traction, it could be a nice little stream of income that wouldn’t really end like a technology book does.
- Bank interest – When you’re talking about passive income assets, this might be the biggest letdown of a goose, but it’s still important. Most of us need to have some money that we can get to pretty easily (liquidity). I’m a fan of the online banks (I use Ally) just because they pay a lot more than the bricks and mortar places. It’s not a big money-maker, but at least it’s something.
As I said, these are just some of the income-producing assets available, but the important thing is to know the difference between the eggs and the geese.
I’ll take the geese any day… what about you?
Thanks for reading!!