Jason and Doug have a meandering discussion on the tragedy in Japan, life insurance, declining home ownership rates creating 6,000,000+ new renters in the next six years, Confessions of a Portfolio Hitman, interest rate predictions and much more.

Most people are associated with one or two people whom they would consider to be “high-maintenance” or demanding of your time and attention. These people are the ones who call to ask why you haven’t commented on their Facebook post. Sometimes this type of person is referred to as a “diva” or a “drama queen.” For some reason, these folks seem to seek out dramatic encounters that draw attention to themselves. In contrast to this, most of us know people who are “low- maintenance” or perfectly content to do their own things. These people are frequently engaged with what is happening, but exhibit a much lower propensity to become “crazy makers” who create drama for no other reason than attracting attention to themselves.

In light of this, consider that the way you earn the income that is necessary to support your lifestyle. Do you have high-maintenance income or low-maintenance income? It is important to understand that a job, a business, or an investment can be either high-maintenance or low- maintenance. Because of this, understanding the difference becomes quite important.

High-Maintenance Income
• • •
Many hours and extensive effort are required. Reliance on expert ability limits your ability to scale revenue upward. Your physical presence is required, limiting your mobility to infrequent vacations.
Low-Maintenance Income
• • •
Fewer hours and minimal management are necessary. Reliance on systems and automation allow revenue to scale quickly. Income can be produced and managed remotely, allowing greater freedom to travel.
Upon reading this, most people will reach two conclusions . . . the first being that they would prefer low-maintenance income and the second being that their main source of income is high- maintenance. This is where we need to implement some premeditated planning. Most “jobs” tend to produce relatively high-maintenance income. Some have the flexibility for remote working, but even that requires significant effort to achieve successfully. Many businesses also produce high-maintenance income, and the business models that are low-maintenance tend to be much more difficult to get off the ground due to intense competition. Even some investment income is high-maintenance in nature if your success depends on scouring the financial markets each day to find and scoop up deals. Consider that a person who earns $200,000 per year, but works 80 hours per week must invest 20 hours per $1,000 in earnings. This equates to $50 per hour . . . not too bad, but still requires 4,000 hours per year of work time. It’s difficult to have much mobility in that scenario.

(The same principle holds true for many highly compensated professionals who earn high hourly rates, but must work large numbers of hours . . . they produce lots of income, but it requires large amounts of effort and is not very flexible.) Conversely, consider a person who starts a small web marketing business that produces a modest $5,000 per year of income but only requires 1 hour per week of management. This equates to $100 per hour of work time and is much more mobile. Low-maintenance income frequently comes in much smaller chunks than high-maintenance income, but can allow us to leverage our time much more effectively. The key to long-term success is to slowly offset your high-maintenance income from a job, business, or investment with low-maintenance income. Practically speaking, this means that you will most likely end up building up low-maintenance income “on the side” while working at your primary occupation.

The advantage of this strategy is that it allows you to test some business ideas that may fail, and be able to absorb the impact of that failure since your primary stream of income is still intact.

However, it is also likely that through continued effort and education, you will discover business and investment models that produce low-maintenance income. As you grow the amount of low-maintenance income in your life relative to the high-maintenance income that results from your primary occupation, it may become possible to leave the primary occupation that currently produces much of your income and devote your time to other interests such as traveling, charitable work, or spending time with your family and loved ones.

Ultimately, what matters to the next generation of income earners is not just how much money they make. What matters is how much money is made per hour of time invested and how much mobility they have to enjoy life outside of work. For people who wish to achieve high leverage over their time, it is likely that extensive up-front efforts will be necessary to assemble a portfolio of low-maintenance income that allows them to be more mobile and more successful in their personal, professional, and financial lives.

Episode: CW 207: Investment Opportunities Created by Declining Home Ownership Rates in America

Guest: Doug Ottersberg

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