What The Wealth

Exploring Passive Income Strategies (88)

• Jonathan Bednar II, CFP • Episode 88

Share episode

Are you tired of the daily grind and looking for ways to diversify your income? Ready to ditch the misconceptions about 'easy' passive income strategies? In this episode I take you on an enlightening journey into the world of passive income. We'll bust some myths, such as the idea that real estate investing or becoming a social media influencer is entirely passive. Instead, I'll introduce you to the potential of dividend growth investing. This strategy doesn't require a heavy-duty capital infusion or a hefty loan from a bank, and it allows you the flexibility to pause and restart at your convenience.

Our conversation doesn't stop at passive income; we also delve deep into wealth creation and financial decision-making. I'll underline the importance of consulting with qualified professionals and making informed decisions based on individual circumstances. We'll address the potential risks involved in investing and discuss different strategies to protect your portfolio. With insights from my real-life client conversations and practical advice, this episode aims to guide you on your path to financial independence. Whether you're setting out on your financial journey or looking to diversify your income, this episode promises to arm you with the insights and strategies you need.

🗓️ Meet with me: https://paradigmwealthpartners.com/begin-your-journey/#calendly
↔️ Connect with me on LinkedIn: https://www.linkedin.com/in/jbednarii/
🌐 Paradigm Wealth Partners (website) – Financial planning for career professionals who want to retire and stay retired: https://paradigmwealthpartners.com/
🌐 What the Wealth (website) – Adding clarity to difficult financial topics: https://whatthewealth.com/
▶️ YouTube: What the Wealth / Paradigm Wealth Partners

If you or someone you care about could use the help of a financial advisor and sees the value in establishing a financial plan, please reach out to me.

Thanks for Listening!

Jonathan

Speaker 1:

Welcome back to what the Wealth. I'm your host, jonathan Bender, certified Financial Planner, owner of Paradigm Wealth Partners in Knoxville, tennessee. I want to talk to you a little bit today about passive income. I had some conversations this past week with some clients who are in their late 30s early 40s and they are balancing and kind of running through the ideas around passive income investing. They have done some of the basics already and now they are moving into this kind of part of their life where they are trying to figure out what do they do with some of their extra cash, what do they do to generate passive income so they don't have to work as hard for their money and let their money work from them? They have thought about real estate investing. They have thought about creating a hobby farm. They have thought about buying a piece of real estate and putting some pads on there so people could part campers.

Speaker 1:

There are all kinds of ideas that come up when people talk about passive income. What I think people fail to realize is a passive income idea is really hard to come up with. There are very few ideas that are really truly passive income. A lot of them have the components where they feel like it might be passive income. Media, social media influencers do a really good job of talking about. Just do this passive income or the side hustle idea and you will generate a thousand extra dollars a month, or two thousand dollars a month, or here is what this person does and they generate twenty thousand dollars a year. There are all kinds of click bait ideas to generate these passive income ideas.

Speaker 1:

What I have realized over the course of my career is that there are very few true passive income investments. In fact, usually this cycle starts up with I have an idea to generate passive income. I think it will be relatively easy. Once I just do A, b and C, it will be said and forget it and I will generate this income. Reality is, most passive income ideas really turn into a lot of additional work and a lot of times, really a second full time job, and that is really not the idea that you had lined up in your mind originally when you came up with this idea. Once you get through that second job career to generate money from your passive income idea, it leads to burnout Again. The cycle is big idea, second job that you were not really planning for and burnout, and that burnout leads to just a decrease in time that you get to spend with family, friends or the experiences that you really want to pursue in life. So what I thought I would do is kind of talk about some other passive income ideas and then talk about one of my favorite passive income ideas.

Speaker 1:

So a lot of people talk about real estate. I think real estate potentially has an idea or a way to be a passive income investment. Obviously, you can generate rent, whether you're doing short term or long term rentals, but it's not truly passive. There's a lot of landlord work that goes to that. Whether you're doing the landlord work yourself or you're outsourcing that work, there's a lot to do to maintain the properties. If you're doing a long term listing or short term listing, your property turns over more.

Speaker 1:

I'm a big real estate investor. I love real estate, but I don't think it's truly passive income. It's quite a bit of work from the people that I talk to about real estate investing and other people that are doing real estate investments. Again, I'm not saying real estate investing is bad, but if you aren't true passive investing, I don't know that real estate's really the best option. I think there are a lot of ways to make money in real estate. I think real estate can be a great wealth builder.

Speaker 1:

I just again, I don't think it's the passive real estate or the passive income generator that people think it is. A lot of times people will think about being a social media influencer Newsflash that is a second career. It takes a lot of time and energy to be a social media influencer. People talk about affiliate links and working with companies so that if you promote those companies and someone else goes to your link to buy that product, then you get paid. Again, that's a lot of work to generate that passive income, you've got to find the product, you've got to promote the product. You've got to probably find multiple products in fact, and so it just again, it takes a lot more work than people realize. It's not just set it and forget it.

Speaker 1:

So I want to talk about my favorite passive income strategy that I believe is truly passive, and that is dividend growth investing. Now I want to say right off the bat obviously dividends are not always guaranteed, and so companies can change their strategy here. I think that's why it's important to have some diversification here. You can use something like an ETF to help spread that diversification around. But I think dividend growth investing provides a lot of check marks in order to accomplish that passive income objective.

Speaker 1:

The first that I think is really strong is that you're not required to buy franchise fee. You don't need a loan from a bank. You don't need a big bunch of capital to infuse into the business, so it is very low barrier to entry. It's easy to get started, anyone can do it, and it doesn't take a lot of money. But, most of all, it just doesn't take a loan. It doesn't take a capital infusion, a large capital infusion. It doesn't take a loan from a bank. It doesn't require a whole lot to get started and I think that's a huge benefit when we think about dividend growth investing. A second benefit is the ability to start with a lower capital amount, so you don't need the huge capital amount. You can start with as little as 25 bucks a month. You can start with a little as 50 bucks a month or 100 bucks a month or whatever your cash flow provides. You can start and use that to buy investments to generate income. Whether you're looking for it on a monthly basis, a quarterly basis, an annual basis, however you're looking to get this income, you can find these stocks or these investments to provide some sort of dividend growth passive strategy.

Speaker 1:

The third and I think this is really important and what I think makes this truly passive about dividend growth investing is the ability to pause. You can pause your contributions, you can pause your investments. You don't have to keep making those month after month. Obviously, the key would be to do that, to keep investing, to keep buying more so that over time you do have really a substantial passive income strategy. But if life gets in the way, if family something happens, a medical emergency or just things get tight, it's really easy to just pause and stop and table those contributions for a future day and then restart them when you want All. While you do that, your investment portfolio, your dividend growth stocks are still working for you and that benefit is what actually makes passive investing work in this situation. Once you have it bought, that investment continues to work around the clock, around the year, for you, whether you add any additional money to it or not. I think that's a huge, huge benefit to passive income.

Speaker 1:

I do think passive income is really a great way for people to generate that excess cash. Again, I just think the misconception is people think too much of it's easy. You can just set it and forget it. There's no strategy, there's no real work behind it, and most of these actually do require quite a bit of work. So just think about that as you're thinking about passive income. Usually, if you're talking with someone in the neighborhood or a friend or family and they start throwing these ideas out, dig deeper, ask questions, I bet it takes a little bit more work than they're leading this on. To be, I'm a big believer in dividend growth investing, using that compounding to power and supercharge your portfolio to provide income for you, maybe now, maybe in the future.

Speaker 1:

So just wanted to kind of talk about this. This is from a real client conversation a couple weeks ago and I think it's just important to talk about the impact of passive investing and dividend growth investments. Be confident in your time and have a wonderful day. Thanks for joining me on another episode of what the Wealth. If you enjoyed the episode today, smash that subscribe button. It helps me more than you think. Also, if you found this episode insightful and a light bulb went off, share it your friend Aunt Judy, the random guy in the office who's always talking about investments.

Speaker 1:

Wealth isn't about just the chuchain. It's about our choices, chances and changing our financial futures. The information in this podcast is informational and general in nature, and it's about what. This podcast is informational and general in nature and does not take into consideration the listener's personal circumstances. This podcast does not intend to be substitute for specific and financial, legal or tax advice. You should consult the approved qualified professional prior to making a final decision. Securities are offered through LPL Financial member, finra, sipc. Paradigm Love Partners is the other business name for Independent Advisor Alliance Investment advice offered through Independent Advisor Alliance, a registered investment advisor. Independent Advisor Alliance and Paradigm Love Partners are separate entities for LPL Financial.