How to Make Safe Passive Incomes

How to Make Safe Passive Incomes By Increasing Your Earning Power


How to make safe passive incomes was the first question that I entertained when I started out to achieve financial independence. While in the process of uncovering the answer to this question, I got introduced to a term called “earning power.”

Developing an understanding of “earning power” lays the foundation for us to make better financial decisions. This is what I mean by “better.” As I began to comprehend how earning income has a natural growth curve to it moving from wage earning, the financial infant stage to interest earning, the financial adult stage, I  started using money as a tool. No matter if I earned income from a job or a business venture, I understood, that money earned is a tool to leverage for getting more money.

My financial paradigm switched from being a consumer, someone who constantly spent the money I earned, to instead investing my earnings into vehicles that would increase my earning potential.

The degree of power that you have to earn income depends on how many pipelines leading to money to which you have access. Hence, by strengthening your earning power, you protect your income from all threats of financial ruin.

Now let me answer the question, “What is earning power?”

The term “earning power” refers to the degree to which you are capable of generating income. For our purposes, when I use the word “earn” I may mean to earn wages, to earn interest on money, or to exponentially grow your money outside of investing it the traditional way.

Understanding the 4 Phases to Increasing Your Earning Power

earning powerThere are four phases to increasing your earning power. Everyone operates within at least one of these phases at any given time. After reading this guide, you will be able to identify which phase you are in and how to move forward to the next phase. In order to strengthen your earning power, you must successfully progress through the phases to arrive at the degree of earning power that you desire.

Now, let me give you an overview of how these four phases to increasing your earning power work and how you can systematically and strategically progress through them to attain unlimited and secure income.

Starting with the first phase, you will need to establish a steady, full-time income flow. Then you must promote yourself to the next phase called the middle-income bracket. To move forward into the third phase, you will need to leverage your current income to establish at least one passive income stream. Then in the final phase, you must access a secure source of income that enables you to establish a financial estate that lives on for generations after you have passed on.

In summary, these are the FOUR phases to your earning power:

  • Phase 1: Steady, Full-Time Income Flow

  • Phase 2: Middle Income Bracket

  • Phase 3: Passive Income Independence

  • Phase 4: Secure Financial Estate

You must move effectively and completely through these four phases to increasing your earning power if you want to eliminate your financial worries forever. In order to do that, there is basic knowledge about where this journey will take you that you must have when starting out.

Knowing Where You Are in These 4 Phases

how to make safe passive incomesTo be in the “Steady, Full-time Income Flow” phase means that you work 36 hours or more weekly and have been consistently over an extended period of 5 years straight. You have not experienced a layoff if you work a job. If you operate a business, you have stayed in the black for that long. You may earn anywhere between $18,000 to $50,000 per year.

The downside to being in this phase is that you will be under constant pressure to prove yourself to yourself and/or to your employer.

The “Middle Income Bracket” phase means that you are a person working in your career field or doing work you are passionate about. If you are an entrepreneur, then you are operating a profitable business that has crossed over the 5 year mark. Statistics say that over 90% of business’ fail by this time, so if you make it this far, you must be operating in the black. You may earn anywhere between $50,000 to $150,000 per year.

The downside to being in this phase however, is that you most likely work more than 40 and even up to 70 hours per week.

The “Passive Income Independence” phase means that you no longer have to trade your time for money to earn income. You only work when you choose to work. Passive income can have different degrees of passivity. The most common definition for passive income means that you do not need to put in any physical work to keep the income flowing. Typical examples of this are stock investments, seller-financed properties or retirement income from IRA’s.

There is a pseudo-passive income definition which means that you need only to put in minimal effort to keep the income flowing. You may put in 2-5 hours each week to generate $10,000+ monthly. Typical examples of this are online affiliate marketing or network marketing done online and not the conventional word-of- mouth method.

A misnomer about passive income that you must understand is that passive income does not necessarily mean permanent income. A passive income stream may end one day. A company that you depend on for passive commissions or dividends may go out of business. This is not uncommon. That’s why it’s wise to generate as many passive income streams that you are able to.

The downside to being in this phase is that it will require a large money and/or time investment upfront to get your passive income stream established. If you choose to establish some form of passive income investment like an IRA then it will require large amounts of money invested. If you opt to pursue methods outside of the traditional investments like seller-financing or network marketing, it may require a large amount of both time and money investment.

The “Secure Financial Estate” phase means that your income is protected from loss for generations to come. At this phase of earning power, your income will outlive you. Certain types of financial products can guarantee that you will not lose your principal invested and can guarantee you a specified rate of interest. These products include a “guaranteed income” clause as a term of the contract.

However, there is a downside. Your personal income must be so solidly established with a considerable cushion of expendable income that you can allocate a good amount of your current income to fund these types of financial products. In addition, you must be able to invest a required sum of money into it on a monthly basis as well.

Furthermore, to build a secure financial estate, you must have certain factors at your disposal. You must have:

  • Expendable monthly income;

  • Thousands of dollars with which to purchase financial products initially;

  • The financial education to identify a solid financial product investment; and

  • Reliable sources from which to purchase the products.

Knowing Which Avenues to Income Are Suited for Each of the 4 Phases

(Note: The following list is not comprehensive by any means but just a starter to give you an idea of how to categorize your options.)

  • Steady, Full-time Income Flow – Ideal Avenues: Jobs, Careers, Entrepreneurial Ventures

  • Middle Income Bracket – Ideal Avenues: Jobs, Careers, Business Ownership

  • Passive Income Independence – Ideal Avenues: Retirement Investment Savings, Seller-Financed Properties, Affiliate and Network Marketing, Peer-to-peer lending, Stocks

  • Secure Financial Estate – Ideal Avenues: Whole life insurance contracts and Annuities with “guaranteed income” clauses as terms to the contract, Stocks in a long-standing company


increase earning power rulesIn closing of Part 1, I want to share with you some observations about what to expect as you progress through the phases to increasing your earning power. Rule 1: There is no law that dictates the length of time that must transpire before you can progress to the next phase. As a matter of fact, phases 1 and 2 may overlap and phases 3 and 4 may even overlap as well.

Rule 2: There is no law that dictates how long it has to take to get through all four phases. It can take five years or it may take 20 years.

Rule 3: The means you choose to establish income in phases 1, 2 or 3 does not have to be from a particular type of work, job, or business.

You do not have to even start out in the type of work you are really passionate about. I advise you to start out with a goal to simply establish your income and not to find work doing what you love. To initially seek work you are passionate about may prove frustrating and may discourage you altogether in aiming toward the ultimate income level you really want to acquire.

If you keep in mind that this is just a starting point toward your ultimate goal, you may even find pleasure in any work you are doing to get you there.

Remember, there is a strategy here you are laying out. The time to pursue your passion comes when you are ready to transition from phase 1 to phase 2 or phase 2 to phase 3, not necessarily in the income establishing period of phase 1.

Rule 4: It will be quite frustrating and unwise to complete these four phases out of order. The order of these four phases are deliberate and systematic. They progress from “not” secure to “secure” income.

What is not apparent is the risk involved at each of these phases. As you progress through these four levels of income, the degree of income loss is greater and recovery may be difficult or next to impossible, especially at level 4, if you have not established your foundation properly.

You should now be wondering what do I mean by saying you may lose money in the “secure financial estate” phase if the money is so-called “secure.” I mean that if you don’t find that reliable resource you CAN lose your shirt, pants and underwear on junk financial products.

Rule 5: You can slip back and forth between any of these phases at any given time. It will depend on how well you implement proven financial strategies successfully.

Rule 6: You must achieve phase 4 in order to be protected from any financial stresses that may come your way.

Rule 7: There are ideal avenues of income suitable for each phase to your earning power. If you explore the type of income sources suited for that phase, then you will have a greater chance of succeeding.

Now that the foundational understanding is laid, let me move into Part 2. In Part 2, I will explain my 6-step strategy that I put together after studying and interviewing experts in the field of personal finance. It was during this time that I identified the components that these financially independent men and women implemented and thus, developed my strategy using them to work toward my 7-year financial independence goal.

Part 2: 6 Step Strategy to Safe Passive Incomes

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