The late Stephen R. Covey, while researching for his book The 7 Habits of Highly Effective People, found that many supposedly successful people were actually a mess.
“If the ladder is not leaning against the right wall, every step we take just gets us to the wrong place faster.”
The COVID-19 pandemic has caused many successful professionals to question whether they’ve been leaning their ladder against the right wall. Nationwide lockdowns have been indiscriminate in the path of economic destruction it has wreaked.
Even professionals like doctors, lawyers, engineers, and executives who rely on their salaries for income have felt the pinch of the pandemic-induced recession.
With no other sources of income to fall back on, high earning professionals who saw their incomes halted or reduced, have had to dip into their savings or liquidated assets to keep up with their high expenses. They’re now questioning whether leaning their ladder on the wall of labor income – income reliant on labor – was wise.
On the road to success, many of us have been very driven and many of us have checked all the same boxes along the way to success – getting into a good college, graduating, going to graduate school, getting our first jobs then climbing the corporate or professional ladder of success.
If you know me well, it’s always pedal to the metal for me – redlining the engine of success all day every day. In my travels, I’ve come across other driven individuals just like me – those in the relentless pursuit of success.
While 2020 has been challenging, I’ve been fortunate to meet and partner with many individuals all over the U.S. and across different walks of life.
What I’ve discovered in 2020 is that even the most driven of us have had cause for reflection over our financial paths.
I met someone recently that had a six-figure job but COVID-19 completely upended his industry. Before COVID, he was convinced he was on track for success and that nothing could derail that. He was a high-earner, what could go wrong?
COVID is what went wrong. When his industry was disrupted, his reliance on active income – income from a job – upended his entire world. With no other sources of income, no passive income, he suffered financially.
Driven professionals like doctors, lawyers, tech professionals, and others have been so driven in their careers that they’ve been blinded to considering backup income sources in case their labor income came to a halt. With many of these professionals watching their incomes reduced, many are considering leaning their ladders on another wall since the one they’ve been climbing didn’t shield them from the economic effects of COVID.
No matter if you’re in Silicon Valley, NYC, or Denver, or whether you work in tech, medicine, law, or some other profession, make sure your ladder is leaning on the right wall.
What is the right wall?
The right wall is the wall that isn’t entirely reliant on active (labor) income. It consists of passive streams of income – the more the better.
You want to be in a position where your money is working for you and not the other way around.
If you don’t generate multiple streams of passive income, you will always be trading time for money. In other words, you will always be working for your money and as COVID-19 has proven, those who rely entirely on the labor income are exposed to economic disaster if they can no longer work.
Without income generated from passive investments – income that doesn’t tire and that doesn’t stop when the sun goes down – you will never achieve financial independence.
Generating multiple streams of passive income is the surest way for professionals to free themselves from their dependence on labor income.
Passive income is the difference between professionals who survive downturns and those who are forced to deplete savings or take out loans to meet their expenses.
So what are ways to generate passive income?
Productive tangible assets like commercial real estate, income-producing businesses, agriculture, and oil & gas have the effect of growing income instead of depleting it.
Multiple streams of income from these productive assets can provide you with the things labor income can not:
- Protections from loss of a job
- The freedom to work because you choose to and not because you have to
- Not having to worry about how to meet your expense if you can’t work
- Not having to depend on an employer to make ends meet