Master Auto-Pilot Income
by Mike Litman
Million Dollar Money Lesson from Mike Litman's Book, "Conversations with Millionaires": Today's lesson is...
To Get Rich You MUST Master Auto-Pilot Income
To explain this lesson further let's refer to what co-author of "Rich Dad, Poor Dad" had to say about that during my interview with her: (The following is an excerpt from my interview with multi-millionaire and best-selling author, Sharon Lechter.)
Mike Litman: Sharon, let's start from the lesson in the book where you guys talk about the lesson called, "The rich don't work for money."
In this chapter there is a specific line that talks about how the poor and the middle class work for money. But, the rich have money work for them. What does that all mean?
Sharon Lechter: Well, let's talk about the different kinds of income that you can make. You can make earned income, you can make passive income, and you can make portfolio income.
Earned income is what we all hear about. That's a job. That's a paycheck. That's money that you received through your own hard work. Your labor as an employee, or as a self-employed person. That's earned income. It's very hard to get rich when your income is based on your personal efforts.
You only have so many hours in the day. You only have so many days in the week. Passive and portfolio income come from assets.
The rich know how to convert their earned income, if they have it, into assets that will generate passive and portfolio income. So, they have their money work hard for them, instead of them working hard for money.
Mike Litman: You brought up assets. Assets and liabilities are the cornerstone or the foundation of the series. Define for us what an asset and a liability is and what they incorporate in someone's portfolio.
Sharon Lechter: Absolutely, Mike. I'm glad you asked. As you may know I'm a CPA by schooling. So, some of my fellow accountants may jump up and down in disagreement when they hear this, but it's very simple.
An asset puts money in your pocket. A liability takes money out of your pocket. You should look at your whole financial life that way. Assets are things that generate income for you. Liabilities are things that you have to sit down and write a check for every month.
-- Mike Litman
Mike Litman is the author of the #1 Best-Selling book, Conversations With Millionaires. In the book 9 Millionaires share their strategies for becoming wealthy.
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- Conversations With Millionaires
By Mike Litman