One of my ‘next steps’ in life is to go after opportunities for building passive income. Why is this so important, you ask?
Active income is essentially payment for services rendered, through the form of a paycheck, contract payment, etc. If the work stops, the payments stop.
Passive income is a residual payment stream for services rendered or actions taken in the past. It takes little work to maintain while the payments continue.
Building a passive income stream is critical in wealth creation, because it is self-perpetuating and almost infinite.
And it’s a lot like cows…
Cows are fantastic creatures. They eat grass all day long and provide us with milk – the basis for almost every dairy product and more. They are remarkably similar to the proverbial golden goose, except that they really exist.
In business, the term ‘cash cow’ refers to a specific product or part of the business that generates a great deal of profit for the company, much more than the expense of production.
We need more milk-producing cows in our life. Contrary to hourly endeavors (like farming) where the fields must be worked constantly, cows are remarkably self-sufficient.
If my metaphor doesn’t have you yawning yet, consider a couple of cow-related concepts:
The amazing thing about cows is that as long as they’re fed and happy, they continue to produce milk. With the advent of automatic milking machines, the process happens almost magically.
Passive income needs to have the same characteristics. Creating streams of income that may need periodic monitoring, but are essentially self-sufficient is paramount.
Consider, for example, what happens if you become disabled tomorrow. Your active income will most likely stop unless you can continue to work. You may have some form of disability insurance, and you may not. And your passive income will continue churning away and producing…
Select endeavors with low long-term hassle and high payout.
Isn’t that the best insurance policy of all?
While it’s probably not the best thing for real cows, keeping your passive income cows in solitary is not a bad idea.
The idea is to prevent the spread of ‘sickness’ and to avoid putting all of your eggs in one basket. If one of your cows gets sick or dies suddenly, you don’t want the others affected.
Surely, a pandemic might sweep through and affect all of them (think recession), but individual diseases will not. The principles of a well-diversified portfolio are just as relevant with passive income as they are with investing.
Everyone enjoys making babies. Starting a little breeding program with your cows is a fantastic idea. In fact, your cows may spontaneously impregnate just by standing around and doing their thing!
The beauty of passive income ideas is that they lead to more passive income ideas. But it doesn’t stop at the conceptual phase. The income itself can be re-invested into other passive income opportunities, breeding little income babies that grow fast!
Selecting high-payout opportunities now allows for quicker reproduction and growth later, when the wheel starts churning.
Naming Your Cows
Have you ever noticed that to an outsider, cows look very similar to one another? If you’ve had the opportunity to talk to old-school farmers, they know all of their cows by name, even when there are tens or hundreds of cows on their fields. How in the world do they do this?
Every cow has unique traits – visual and personality characteristics – that set it apart from all the others. Like a parent who can tell one twin from the other, a good farmer knows his flock (or herd, or what not).
Be the farmer. To those not familiar with passive income, it can look like an overwhelming sea of cows, all seemingly doing the same thing – eating and milking. But each opportunity you come across or create will be unique, and will hold a special place within the larger framework of what you’re trying to build.
Build Your Own Passive Income
While I don’t have a whole lot of passive income experience to share with you yet, I have found some excellent resources to look into.
Here are a few posts from blogs I respect to get you started:
- Earning a Passive Income While at Work (from The Smart Passive Income Blog)
- What is Passive Income? (from The Passive Family Income Blog)
Explore these blog’s archives for some real gems on passive income. You can also read my 7 tips for turning a hobby into some side income.
Have you had experience with passive income you’d like to share? Please leave us a comment!
Photo by stevoarnold
6 thoughts on “Building Passive Income with Cows”
Very smart, in fact, even necessary, I’d say, for any financial plan. Having passive income in itself should be part of every emergency fund/plan.
I *love* this article and it’s use of metaphors. It was very well written. I also agree with your statements.
.-= Investor Junkie´s last post: Expect Even Lower Bank Rates =-.
Thanks Junkie. I don’t get this “cheesy” (du dum ching) very often, but when I do, it’s a lot of fun.
If by definition, they put money in your pocket… Then… Why not? They’re an asset. 😛
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