Income, Discipline, Time

“Compounding is mankind’s greatest invention because it allows for the reliable, systematic accumulation of wealth.” - Albert Einstein

I believe in the power of passive income… this is income derived from rental properties in which I am not actively involved. I also earn income as an employee, but as an employee there will always be a cap on how much money I can earn. As a sales person, I have good years and bad years but overall my earnings fall in the same general range year after year.

Scott Allan advises, “If you want to earn more, work less, and have a decent retirement, you're going to have to start creating income streams that do not require your direct involvement.” Passive income is income that doesn’t require direct involvement.

But what if you would rather not be a landlord? Real estate is not for everyone and it becomes increasingly difficult to make properties cash flow in many markets. So if you do not want to invest in houses, there are other ways to achieve wealth.

On MSN Money, Harry Domash writes, “Here is the single most important thing you will ever hear about investing: Getting rich is simple. Not easy, but simple. And here is the second most important thing you will ever hear about investing: You have no excuse not to do it.”

“Only three ingredients are needed: income, discipline and time. Chances are, you already have two of them, income and time. All you need to do is add the third, discipline. And armed with the following knowledge, that key third ingredient may be a lot easier to find.”

“Here's how it works: Say you start with nothing, invest $500 (of your income) a month (a healthy discipline), and let your money ride (over time) in diversified investments. Long term, the stock market returns at least 10% annually. Assuming a 10% return, you’d have $102,000 after 10 years, $380,000 after 20 years, and $1.1 million in 30 years. All this happens through the power of regular investing and a simple-but-powerful concept called compounding.”

The same ingredients apply to real estate investing: income, discipline and time. You need to pay down the mortgages with rental income and over time you own the properties free and clear. The point being, pick an investment strategy and stick to it.

“Here's the bottom line, like it or not: The fate of your retirement, your comfort in older age, probably lies in your commitment to the concepts laid out in the paragraphs above. For the vast majority of us, wealth creation is a slow and steady -- and powerful -- process. The tortoise almost always beats the hare.”