Top 10 Passive Income Book's - February 2019 Update
Let me start this section off by saying one thing; this list of top 10 passive income books are entirely subjective. Just because it may be in my top 10 passive income books may not mean it is in your top 10 passive income books! That being said I have a feeling that due to the number of books I have read on this topic my advice is pretty well informed.
So what is passive income? Passive income is the automatic generation of cash flows without having to spend regular arduous amounts of time to create. I say regular because I still think sales of a book which took you 6 months to write is passive as once you have written it and it remains popular you could earn passive income for the next 20+ years.
The following books all have passive income in mind, however some of them may not directly talk about it. This is because I think there are two main categories which fall under the passive income umbrella. The first is books which list out ideas and strategies for you to implement in order to generate passive income such as dropshipping, investing in the share market etc. These are the most common methods which are frequently discussed in the books which I have read. The second is books on changing your mindset in order to help you achieve passive income. These are just as important as the first category as without the mindset you can be spoon fed all the best ideas in the world but you will never put them into action.
Therefore I have decided to split out the Top 10 Passive Income Book list into the two categories having a top 10 for each category. The first category is called Ideas and Strategies and the second category is called Mindset.
Without further adieu....
Ideas and Strategies
4. The Prosperity Bible
5. The Power of Habit
6. You are a Badass at Making Money
8. Creating Money
10. The Power of Your Subconscious Mind
1. Rich people buy assets, poor people buy liabilities.
Rich Dad, Poor Dad taught me one incredibly important thing which is the reason why it is up the top and why I recommend it so highly to everyone else. Rich people buy assets, poor people buy liabilities. What does this mean? To give you an example take 2 people who are both earning a monthly paycheck of $4,000. The rich person would take that paycheck and immediately invest $3,500 of it and get that money working for him to make more and more money. This could be in the form of shares, or investing it into his vending machine business, or putting into a term deposit. The remaining $500 he will keep and will use it to pay for his expenses. The poor person would take that paycheck and spend it on that new suit he wanted, the new pair of shoes to match the suit, a brand new watch, and pay his credit card off. There will be a small portion left for his monthly expenses. Do you see the difference here? It seems like the poor person will always be poor, as they don’t understand this concept. Let me repeat that lesson again for you so you understand it. Rich people buy assets, poor people buy liabilities. I know at times it can be difficult as you genuinely do need to buy a new suit for work as your previous one is getting thread bare and you have been wearing it for a few year, however the point of this is to recognize that this money could be better spent elsewhere and to be conscious that this is not going to make me richer. I guess secondary to this is that anything you buy that does not directly generate income for you is a liability i.e. you motor vehicle. This may take you from work but it is a liability. It will never make money for you; it will only cost you (unless you are in the business of flipping cars for profit). The new suit you wanted to buy is a liability it is not an asset. Only ever buy assets.
2. Outsource, Outsource, Outsource.
The 4 - Hour Work Week taught me several things, the most important being – Outsource, Outsource, Outsource. What does this mean? You can run a business buy outsourcing as much as possible and concentrate on only the most important tasks. Seeing this book was written in 2007, this really came before the huge rise in online outsourcing and freelance opportunities that are from fiver.com, airtasker.com etc. Tim used his examples based on running a business, however the concepts, which he discusses, are applicable to trying to generate passive income. If you want to create an online advertising agency, you can outsource a personal assistant to type up all the reports, outsource someone for SEO, outsource someone to make emails and calls to obtain potential clients, and all you have to do is for one hour a day review the work of everyone and make the executive decisions. You can do this after work, before work, on your lunch break etc. This book really opened my eyes up to the opportunities that exist out there and how to make the most of them.
3. Create the lifestyle that you want, not that others want.
The 5-Day Weekend I chose to put so highly because it teaches us one thing. Create the lifestyle that you want, not that others want. If you want a 5-day weekend it is pretty simple, you need to figure out exactly what your expenses are in a week. Say for example you add up all your yearly expenses and divide them by 52 then you get a figure of $500 per week as your expenses. Therefore to allow yourself to have more and more of a weekend you just need to strive towards generating $500 a week as income. From here you work on generating multiple sources of passive income and over several years you will get closer and closer to generating your total weekly expense through passive income. Whilst you may want to stay in the workforce then anything you save on top of that will only further help you generate more and more passive income. This concept was different to most other passive income books and it was spelt out pretty clearly. The majority of these passive income books just list out the different methods of generating wealth but don’t really give any context. This book is all context. Everyone is always so conscious of being rich but they don’t really know what that means. Would you say a person who has $500K in his bank account but is forced to work 6 days a week is richer than someone who has $5K in his bank account but only works 2 days a week to cover his costs? Its all relative and that is what this book taught me.
4. There are three people in life – those walking on the sidewalk, those in the slow lane and those in the fast lane.
The Millionaire Fastlane taught me – there are three people in life – those walking on the sidewalk, those in the slow lane and those in the fast lane. The sidewalk – people are spending way more than they can. They are spiraling out of control with car leases, huge rent for their fancy condo and apartment, and nowhere to go. The slow lane – well educate people who save 10% of your income and invest it, you continue to do so over 50 years and you end up with a million dollars when you are 70. At the age of 70 you can start to spend your money. The fast lane – those who can get rich whilst before they reach and age where they are restricted in how they can spend their money. You can go travel the world when you are young, you can enjoy go to nice beaches and walk mountains before, spend time away from home all without needing to constantly get check ups from your doctors on a weekly basis.
5. Pay yourself first.
The Richest Man in Babylon was incredibly similar to the message conveyed as part of Rich Dad Poor Dad, and that was Pay yourself first. Clason recommends saving 10% of everything you earn and save it for the future. How does this apply to modern day? You get a pay check from work, the very first thing you need to do is to first take away at least 10% for savings immediately. Then you can base your lifestyle on the remaining portion. The opposite way to this is to blow your paycheck on the very first day you get it and have nothing to show for it. Or to even spend your entire paycheck over the period until your next paycheck comes. Your savings is dictated by the lifestyle you are living, when really your savings should come first and then adjust your lifestyle accordingly.
6. Only those who become "money conscious" ever accumulate great riches.
Think and Grow Rich taught me this only those who become "money conscious" ever accumulate great riches. So what does money conscious mean? The book explains it as when one’s mind is so consumed with the desire for money, that you already see yourself in possession of it. This concept when I first read it I likened it to being delirious or having delusions of grandeur. The book goes on to say only those who are money conscious ever accumulate great riches, how can this be? Only those who are so delirious and obsessed with money and obtaining it never do. But then it made more and more sense. Those people who have so much thirst for money, insane amounts that they will never stop until they get it will achieve it. The average Joe who has no desire for money will never really obtain it, he wont do whatever it takes to achieve it, he will just dilly dally around his entire life just being content with what he has. He has no desire.
7. Most claims to be a passive income are a scam
From Joseph Hogues The Passive Income Myth: How to Create a Stream of Income from Real Estate, Blogging, Bonds and Stocks Investing Basics there is one very clear point which he raises from the very beginning - Most claims to be a passive income are a scam. This is 100% true and the amount of people who get scammed by this is ridiculous. The young, the middle aged, and the old all get scammed. People need to exercise caution and due diligence when they are reviewing and investing in passive income opportunities. You need to remain skeptical at all times as most people out there are after your cold hard earned cash. Keep that in mind.
8. Everyone makes mistakes, only the rich learn from their mistakes.
In The Boggleheads Guide to Investing I learnt a very powerful lesson about investing.
Everyone makes mistakes even the very best investors out there, people loose money based on poor choices. It is inevitable however the thing that separates the rich from the poor here are two things –
1) Your ability to learn from your mistakes
2) Your saving habits.
People who make a bad investment choice and have a poor saving habit will struggle so hard to recover from the loss. For instance say you are a bad saver and somehow you magically get to $10,000 and invest it in a share that is a complete flop and you lose your entire $10,000. It may take that person another 10 years to save up again so they can invest another $10,000. In contrast to this a person with a good savings ethic will be able to save up another $10,000 by the end of the year and will have another crack this time having learnt a $10,000 lesson.
Even if you lose $10,000 on a poor investment choice, stay positive as you can learn from your mistake and hopefully take that specific knowledge and use it when you have more on the line so you don’t make a $100,000 mistake or a $1,000,000 mistake. Glass half full at all times and always keep learning. Nothing is ever a waste.
9. Saving 10% of your income isn’t enough
In MJ DeMarco’s The Millionaire Fastlane, MJ mentions that by only savings 10% of your salary, you get absolutely nowhere. An average salary of an architect at $85K per year, if you are saving 10% of your income MJ claims it would take 147 years (figures rounded according to the graph). His point is that by saving so litte you are never going to get anywhere in life. Now there are two flaws in this instance, not everyone wants $1M, some people would be happy with $200K in their bank and then it would be more realistic. The other flaw is that most people would save more than 10% and thus the timings are reduced as well as having two incomes etc. So despite the flaws his point is to show you by just saving 10% and “paying yourself first” Richest Man in Babylon you are not going to end up anywhere.
This list is ever growing and ever changing.