Most people solve this problem of paying their monthly bills by getting a job. This is something we call active income. In other words, we actively exchange our work for money. It doesn’t matter if the work is manual labor or more skilled brain work
. With a job, you are relying on someone else to keep you employed so the money continues to flow into your bank account. If the job ends, so does your money. And when the money ends, you have no way to pay those monthly bills.
Thus, the Rat Race begins. When we think of retirement, most people imagine the day when they no longer need to go to that job anymore. It usually occurs somewhere around the age of 65. By that time, hopefully enough money
has been saved to carry them through the retirement years. For many people, retirement may never come. The nature of their own personal Rat Race has somehow kept them from acquiring enough money to cover their expenses for their remaining days.
On the other hand, you can also cover that $5,000 total of monthly expenses with something called passive income. For our discussion here, I want to focus on the type of passive income we can generate by purchasing something called an asset.
So instead of working to create cash, we want to explore what it looks like when we purchase an asset that creates ongoing cash for us — every month, every year, for as long as it fits our desires.
In the coming chapters we’ll explore this in more detail. When we buy an asset, we place it in the Asset column of our balance sheet.
These assets can include real estate, a business, commodities such as gold or oil wells, and paper assets such as stocks.