April 13, 2023

JF3143: How to Eliminate Pain Points Using Passive Income | Passive Investor Tips ft. Travis Watts



Passive Investor Tips is a weekly series hosted by full-time passive investor and Best Ever Show host, Travis Watts. In each bite-sized episode, Travis breaks down passive investor topics, simplifying the philosophy and mindset while providing tactical, valuable information on how to be a passive investor.

In this episode, Travis talks about how passive income can help you eliminate pain points standing in the way of making your life better. He also shares how investment in knowledge pays the best interest, which can lead to enhancing your lifestyle while learning the game of passive income.

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Travis Watts: Welcome back, Best Ever listeners, to another episode of Passive Investor Tips. I'm your host, Travis Watts. In today's episode what we're talking about is how to eliminate your pain points using passive income. Disclaimers, as always, never financial advice; not telling you or anyone what to do. Educational and informational purposes only. I appreciate you guys being here, and I wanna start out with an Aristotle quote. Aristotle once said "The aim of the wise is not to secure pleasure, but to avoid pain." And a more modern-day quote comes from Tony Robbins. He says "People will do more to avoid pain than they will do to gain pleasure." So without a doubt, for thousands of years we humans have been looking to avoid pain points. So I figured in this episode let me show you how to do exactly that using passive income.

So a lot of investors, myself included, especially when I first got started with investing, have big, lucrative, long-term goals. When I ask people about their goals, it's usually the longest-term goal. it's usually "I want to retire from the corporate world by the age of 55", or "I wanna have X amount of net worth when I retire. I wanna have X amount of passive income per month", and that's usually a pretty significant number. But what if you could start benefitting and seeing results a lot sooner? What if you could start on your very next investment?

So let me start by sharing a quick story from my background. There was a period of time in my life, years and years ago, where I had debt. I had bad debt. And this was in the form of an auto loan. I had purchased this really nice car, that frankly I couldn't afford, and this came at a time in my life where my gross earnings were around $30,000 per year. So as you can imagine, any kind of payment that I had in my life at that time was frankly a big deal.

So every month I had to make this payment, and it was a major pain point. I would cringe, I would just fill up with anxiety; I was always worried that something else was gonna pop up that particular month that would not allow me to make the payment, therefore I would be losing my car.

Now, this payment was about $500 per month, but again, putting that in perspective of someone who earns $30,000 gross income per year, it was a big deal.

So like most people, I would go to work, I would save my money, and I would make that payment at the first of the month. And then my anxiety would drop down for maybe two or three weeks, until I started thinking about having to make the payment again. Now, this happened just before I started investing in real estate. And real estate was a huge game changer for me, and it was passive income that was the biggest game changer to me. And the very first introduction that I had to passive income was I rented out a room in the house that I had. It's now called House hacking, I guess; back then it was called having a roommate. But this roommate effectively started paying me $600 per month on the first of the month. And what do you think I did with that $600 check? I made my car payment, which was my biggest pain point. So I effectively learned how to have someone else pay for my car. And more importantly, from the emotional side of it, I eliminated one of my biggest pain points in life at that time.

Now, throughout the years I've used a very similar strategy. So the strategy is actually quite simple. It's that you make an investment, that investment produces passive income, and you use that passive income to eliminate or remove a pain point from your life. So let me share with you quickly a few practical examples and takeaways from this.

So example number one. Let's say that you have kids, and they're a mess, and they're always tearing up the house, and you're always having to clean the house nonstop. So that would be your pain point. So let's say a house cleaning service costs $150, for a group or a person to come in and clean your house. Well, let's say that you had that done twice per month; well, that would be $300 per month. So how I would look at this is if I took $50,000 and invested it into anything real estate, REITs, notes, ETFs, you name it, something that produces passive income - let's call it an 8% annualized yield, just for example purposes. That would effectively give you $330 per month in passive income, which could be used to hire the house cleaning service, thus eliminating that particular pain point.

Break: [00:05:53.04]

Travis Watts: Another example would be let's say you have a very high-stress job and you find it hard to unwind at the end of the week. Well, using the same example as before, invest $50,000 into an asset that produces passive income; we'll call it 8% yield annualized. Well, you might consider setting up a massage on a Friday or Saturday, two or three times per month, and using that $333 to pay for it, therefore eliminating the pain point and making your weekends a little more enjoyable.

Now here's an example for those of you who may be a little more advanced and want to take this to the next level. MarketWatch released an article in 2022 stating that Ford Motor Company and their customers had an average loan payment of $832 per month for those who had purchased a Ford vehicle and chose to finance it, when compared to an average lease payment of only $516 per month. So consider this... So instead of buying vehicles throughout a lifetime, and financing them, and paying the heavy interest and watching your investment go down and down due to depreciation, what if instead you had taken one time to invest $100,000 into a passive income producing assets that yielded 8% a year on average, that would generate roughly $666 per month. Now listen, we're not even talking about potential equity upside, meaning that this investment, maybe your $100,000 turns into $200,000 over time or something like that, depending on what you're investing in; we're only talking about the cashflow component. So using this $666 per month, possibly growing and expanding over time, depending on your investment choice, would allow you to effectively have unlimited leased vehicles throughout a lifetime. But here's the two major takeaways from that strategy.

Number one, you're not spending the $100,000. The $100,000 is not going to zero because your vehicles are depreciating; you're just moving it over here into an investment, preserving that principle and using the passive income to effectively lease vehicles throughout a lifetime. And number two, compare this to what most people do. Let's say the average person buys five cars over their lifetime. They pay an average of $50,000 every time they buy a car including the taxes, and fees, and registration, and whatnot. So if they depreciate to $10,000 in value each car, because you've put a couple hundred thousand miles on them, and they're many years older at this point, and then you sell or you trade them in for a new vehicle - that's effectively $200,000 in capital loss throughout a lifetime, and that doesn't even include any financing and interest costs if you chose to finance the vehicles.

So if nothing else in this short episode, just a unique and creative way to look at the world. In other words, you don't have to suffer until your golden years and have all of these pain points build up until then; you can start eliminating pain points today.

And I want to leave you with this quote from Benjamin Graham. He says "An investment in knowledge pays the best interest." And that's the whole purpose of this series. It's to help you better and enhance your lifestyle while learning the game of passive income.

Thank you guys so much for listening to another episode of Passive Investor Tips. I'm Travis Watts. I truly appreciate you being here. Reach out and connect anytime; I love the feedback, I love the comments; happy to be a resource for you or anyone else who you think could benefit from these episodes.

Have a best ever week. We'll see you in the next episode.


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