Financial Intelligence…

Life’s gonna suck unless you have passive income.

Some say that middle class people throughout the world are like rats, running as fast as we can around the ‘rat race’ of life. And until you can break free from the cycle of paychecks, doodads and expenses, your life is doomed. I wouldn’t say that this is the only way to look at things, but if we did, what would it mean?

There are a lot of good reasons to see value in this metaphor. For a start, how many people do you know that are truly living their bliss? If you asked 100 people what they would do if they won the lottery, how many do you think would tell you that nothing would change? What about you: If I were to give you $1,000,000 to do whatever you wanted with, how would your life change?

The answer for most people: HEAPS!!!

If you are doing or not doing something because of money, you are a slave to money.

That’s right: don’t use softeners or transformational vocabulary… Sure you may like your job – good for you! But if you wouldn’t do it if you didn’t have to find the money to pay the bills, then you are trading in your time – the currency of your life – for money. That means that youare trading your life for money.

It is a logical necessity – there is no other way! If money determines how you spend your time – the only resource that is ever truly yours -then you are a slave to money.

If you’re like me, and you value your life, you probably don’t like the idea that you are trading your time for your life. When I first realised it, I certainly didn’t!


Just think about the concept of retirement for a moment. The idea that I grew up with was that once you get too old to do anything much useful, the government gives you a pension that you use with your savings to live out your remaining days fulfilling the dreams that you were too busy to fulfill during your working life.

The very concept of retirement suggests that you voluntarily ‘choose’ to do things that you really don’t want to do!

I went to law school – they finally got so sick of me that they gaveme the sheet of paper and told me to go away! My mother in particular was obsessed by the idea of her son being a highly trained (and naturally highly paid) lawyer. To date, I have disappointed her in this regard. Most of the lawyers that I have ever met don’t like what they do. They are happy to work hard – very hard mostly – so that they can enjoy their weekends and live the highlife.

There was a Charlie Brown cartoon that I saw when I was 15 or so that has stuck in my mind ever since. Linus was explaining to Charlie Brown that you go to school to get good grades, so that you can get in to college. There, you work hard, get good grades so that you can go to graduate school, so that you can get a good job, have a family and have kids… So that they can go to school, work hard to get good grades so that they can goto college, so that they can get good grades…

Most people think just like Linus.
Do you?

My Dad is a very wise man. He wasn’t academically intelligent or well educated in the formal sense. But he taught me many profound truths. Like the time he told me that “sometimes you have to stand on the table to get a different view of the world” on the way to Nudgee College
who we were competing with in debating so that I could use that phrase to close my team’s case. He taught me as long ago as I can remember that, “When you find a job that you love, you’ll never work another day in your life.”

For many years, I didn’t understand what he really meant. I certainly didn’t understand why I was wearing cheap shoes and discount store clothes, while my friends at school were wearing the Nike and Reebok. But, as time went on, I noticed that things were changing… Although I didn’t think that my family was wealthy, I came to realise that my parents had invested so much of their income that they really didn’t have to work anyway! That was when I realised the value of passive income.

Income that works out

I need to draw a distinction here between types of income. The first sort of income is like that from a job – you do work, they give you money. Let’s call this active income. The second type is like the interest that a bank gives you on your savings. Let’s call it passive income.

The line is somewhat artificial. There is never anything that is really passive income. Afterall, even if you just have to decide which term deposit to put your money into, you still have to do something for it. And you need to ensure that you’re putting the money into a bank that is financially secure etc etc etc. However, it is a useful scale to consider. Perhaps we can define passive income as income that is generated like profit from a business – you just have to make sure that the right people are in charge of the business, then the business runs itself.

Most people believe that they have to work

Our society is a very effective indoctrination system. That’s why it works. In order for our world to function, we must share certain beliefs, values and rules. Laws provide some of these, as do religions and families. The result of this cultural conditioning is that most people believe that they have to go to work.

But these beliefs, values and rules aren’t true. At least, they aren’t true literally and universally. They are simply the best stable approximation of reality that our society has been able to adopt thus far. Right now, sitting at your computer, or whereever you are, you are
viewing the world not as it is, but as you are. When you interpret the information that you hear or read or see, you interpret that information through your conscious and unconscious filters and beliefs.

What if you didn’t have to go to work?

You need to deal with this belief.

We, as human beings, derive great pleasure and reward from contributing to the society in which we live. We receive social acclaim, and sometimes tangible rewards. But by trading in your time for money, you are preventing yourself from finding and using your greatest talents.

What is an Entrepreneur?

An entrepreneur is somebody who builds an asset. They may work within a business, or even just invest some of the money that they receive from their job. But fundamentally, an entrepreneur is somebody who works to develop a financially self-sufficient entity. Entrepreneurs work in many ways.

But starting a business is risky. That’s why franchises are so successful. A franchise is literally a license to make money! You pay the owner of the system an amount, in exchange for which you can use their ideas and their systems to make money. Franchises tend to be expensive, and restrictedto those who have already made themselves wealthy.

But how can ordinary people make money?

The equivalent for many people is Network Marketing. Avoiding the financial risks entailed in the significant investment (try around $1,000,000 for a McDonalds) that is required to buy a good franchise, Network Marketing allows a person to build their own business – build an asset – using a system provided by somebody else.

Network marketing is different from a pyramid scheme. Pyramid schemes are illegal, and are defined by complex legislative provisions. Essentially, pyramid schemes are ‘businesses’ that allow a person to make money by getting other people into the business, rather than by actually selling a product or offering a service. Network marketing is more like receiving a commission on a referral. After a weekend, people will often talk about the movies that they saw, or the restaurants that they went to. Network marketing simply allows you to make money when you refer somebody to a worthwhile company – if they like the products, they’ll buy more of them,
and you’ll receive a commission. It’s that simple.

Network marketing does not have to involve large amounts of selling.
All that you need to do to be successful is to tell people about this great idea/ great company/ great experience. Good network marketing companies today deal directly with the independent business owners, and will deliver directly to yourself or your customers… You don’t have to become a ‘distributor,’ since you carry no stock!

A Paradigm Shift

Others might suggest that the real key to success is living a life on purpose. Those that are not following their personal pathway in life are betraying their personal desires, needs and skills, and doing a disservice to the world that they live in. I believe that you have a ‘song to sing’ and that our world will be better for you having sung that song.

Whatever they are, you have gifts to give the world that we live in, and you do yourself no favours by playing small.
My experience is that people often can feel when they’re ‘on purpose.’

I hope that you do. If not, what could you do today to put yourself back on track?

Inside out

Financial intelligence is just about understand a balance sheet. You’ve got assets, liabilities, revenues and expenses. Assets give you money in the form of revenue, while liabilities take it away as expenses. Revenues pay for your expenses. If you have more revenues than expenses, that surplus can become an asset. If you have more expenses than revenues, that deficit can become a liability.

Spend less than you earn. Invest the difference.

If you want to be wealthy, you need to build assets.

Network marketing and franchises are powerful vehicles for increasing your assets.Your conditioning may have blinded you to opportunities that do exist. Look for a better way.

Update 27 January 2003

Types of Income

You can generate money from four basic sources: Employment, Self-Employment, Business and Investment. Employees are paid per week or per hour. Self-Employment gives generally more freedom than employees because they are also the person in charge, however they remain only able to charge per week or hour. Business owners do not have to work directly in their business – they pay a manager to run the business for them. Investors simply provide the capital necessary for a business owner to pay a manager to run the business.
An individual may have multiple income streams – in fact this is good! Furthermore, a single income stream may have multiple characteristics. For example, as a Zen Do Kai instructor, I arrange for promotions and marketing, and have other people run sessions for me, like a Business owner would. I also conduct some sessions personally – Self-Employment. Systematisation provides the key for moving between Self-Employment and business ownership.

Reasons for running a business

There are very few real reasons for running a business:

  1. Create money for you.
  2. Accomplish some social outcome.
  3. Allow you to do something that you want to do.

Do not confuse the three. I teach karate primarily because I want to do karate… not for the money, but because I enjoy it. A secondary consideration is that I believe that Zen Do Kai is a powerfully positive force for good in the lives of many people, and contributes something of genuine value to the community. If I wanted to make money, I would conduct my classes differently – and wouldn’t have 7am sessions!

Key Points

  1. Assets are things that produce cash flow.
  2. Liabilities are things that cost you money.
  3. Rich people spend less than they earn, and invest the surplus.
  4. There are essentially four ways that you can generate money: Working for somebody else, Working for yourself, Building a business, or Investing in someone else’s business.
  5. When you work for yourself or somebody else, you are using your time to generate money. When you build a business or invest in someone else’s business, you are using your money to make money.
  6. “Job” means “Just Over Broke.” Sure, you can make a lot of money from some occupations… But mostly, when your income increases, your expenses increase to match them!
  7. A business is a self-sufficient entity. Self-employment can lead to a business through systemisation. If you could not leave the business for a year, you are still self-employed
  8. If you are looking forwards to retirement as a time when you can do whatever you want, you are doing something wrong!
  9. Passive income does not depend upon your efforts for its creation. Active income does.
  10. Do you have to go to work? Really? Do you believe that, or has our society trained you to think like that?
  11. Live Your life on purpose.
  12. Become An entrepreneur: Work on your own business.
  13. Franchising Is one way out of the rat race. Network marketing is another.
  14. Have fun