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I rolled out of bed this morning, logged into my brokerage account, and saw that I had received $30 in stock dividends. That’ll be worth about $25 after taxes.
In a couple hours I’ll show up to work and earn about $38 during my first hour in the office. That’ll be worth about $30 after taxes.
The beauty of the first income stream is that it required no effort on my part. I bought shares in a stock index fund a couple years ago and moved on with my life. Now, every three months that index fund pays me dividends. I don’t even have to walk to the mailbox to collect the payment.
The second income stream, by contrast, requires work. I have to get out of bed, get dressed, drive to a specific location, sit in a specific spot, and work on a project that was assigned to me.
I earn income from dividends through being an owner and doing no work. My income is purely dependent on how many shares I own. Conversely, I earn income from my 9-5 through being an employee and actively doing work. My income is dependent on my productivity and my job experience.
I much prefer to earn income through being an owner rather than being an employee, which is why I am making the conscious decision to acquire assets.
Stocks and REITs reward me for being an owner by paying dividends and generally increasing in value over time.
This blog is also an asset. Each article works hard to earn me a few dollars each day through ads and affiliate links.
By owning stocks, REITs, and a blog, I have a group of assets that work to earn me money without my oversight. These income streams don’t require me to adhere to a strict schedule, a commute, or a dress code. They merely require ownership.
This simple truth is why owning assets is better than having job experience.
I work with plenty of people who are in their 40s and 50s earning $60+ per hour. They truly deserve their hourly wages because they have years of experience and expertise that add real value to our company.
The problem is that their job experience only buys them the right to earn a high income for their time. It does not provide them with the luxury of earning income while they sleep. They still have to follow a dress code, commute to a specific place during specific hours, and answer to a boss. They still have to trade time for money.
Of course, there’s nothing wrong with being an employee if you enjoy the work you do. But work situations can change without warning. Layoffs take place. Great bosses leave. Cool coworkers move. Bonuses get cut. Shit happens. If you don’t own assets that provide passive income, you could be stuck in a miserable work environment that you’re forced to embrace to earn income.
This is why owning assets is better than having job experience. Assets provide income and time while job experience provides income at the expense of your time.
Zach is the author behind Four Pillar Freedom, a blog that teaches you how to build wealth and gain freedom in life.
Zach's favorite free financial tool he's been using since 2015 to manage his net worth is Personal Capital. Each month he uses their free Investment Checkup tool and Retirement Planner to track his investments and ensure that he's on the fast track to financial freedom.
Although the bulk of his net worth is invested in index funds, his favorite place to invest in individual stocks is M1 Finance, a site that allows you to build a custom portfolio of stocks for free.
His favorite way to save money each month on his recurring bills is by using Trim, a free financial app that negotiates lower cable, internet, and phone bills with any provider on your behalf.
His favorite place to find new personal finance articles to read is Collecting Wisdom, a site that collects the best personal finance articles floating around the web on a daily basis.
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Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.