When I was a young child, one of my favorite childhood stories was the 3 Little Pigs. As a child I loved seeing the last pig who built his house out of brick, outsmart and outwit the big bad wolf. That always made me happy that the little pig survived the big bad wolf because the last two failed and were sad little pigs.
If you haven’t seen the Disney version of the Three Little Pigs here it is.
Last week, I thought of a creative relationship between this child story and the 3 types of financial incomes. I hope you enjoy this little story.
Once upon a time…
there were 3 very happy people: Bill, Dave, and Adam. Each lived a happy life and enjoyed what live gave them. All three of them finished college and were ready to begin life as we know as the ‘real world’.
Bill’s Earned Income
Bill was a happy individual who found a job working for a computer technology company. He loved his job and was being promoted to receive higher pay due to his good work ethic. Life was going great for Bill and Bill decided to now put his earned income from his job into a 401K retirement plan. He was planning to save up for retirement and enjoy a relaxing life when he became older. Bill followed all the sound advice college offered him. He got a degree, went on to get a nice, secure job, and now was living life.
Dave’s Portfolio Income
Dave on the other hand owned his own business and worked for himself. However, Dave knew the importance of investing money because he took a few business classes in college and decided to invest in a mutual fund to create some portfolio income. Dave always knew that investing was important so he threw his extra money of what he had into a mutual fund to stay active. He knew that the value of his money would be worth more in the future than his money would be now.
Adam’s Passive Income
Lastly, there was Adam. Adam knew the importance of building a solid foundation in his financial education and what passive income could do for him. Adam decided to work extremely hard from the start, building up businesses and investing in good financial investments that he understood. He later had a few businesses and investments that each gave him some solid passive income that would allow him to relax later down the road. He knew that these would take care of his retirement and he would be satisfied.
The Big Bad Wolf
One day, the big bad wolf came along (the bad economy). The big bad wolf first knocked on Bill’s door. Bill thought he was safe until the dreaded day happened, “Because of the tough economic times, Bill you are going to be let go from your position. This is your last day at work!” his boss said.
Bill was devastated! He did not understand what just happened! He did what everyone told him to do! Go to college, get good grades, get into a good company with a good job. Now, Bill was jobless. His income stopped and his retirement account was no more.
The big bad wolf later quietly came to the front door of Dave’s house. Just like the movie, Dave at first thought he was safe because he had some financial investments. Dave knew he would be better than most people because he had a mutual fund that was giving him pretty good returns. One day, the big bad wolf suddenly blew with all his strength and knocked down his personal business and mutual fund investments. The stock market took a deep toll and since no one was buying as much as they were before, his small business suffered greatly. Dave strongly thought he would make it, however he was back to square one again. He had to build his ‘house’ all over again.
Finally, the big bad wolf reached Adam’s house. Adam knew that nothing was going to stop him because he build his ‘house’ with a strong foundation. Adam was very diverse with his incomes. His business and investments brought in decent amount of passive income.
Now, the big bad wolf was very successful tearing down the first two little guys. The big bad wolf believed he would have no problem with the final person. However, as the big bad wolf blew with all his strength, he found himself unsuccessful. The big bad wolf tried again and failed. Later, the big bad wolf, just like the movie, thought of a clever way to come in from another entrance, the chimney. However, Adam already was educated and knew what to do in those situations. He outwitted the big bad wolf and still had his ‘house’ standing up.
Meanwhile, Bill and Dave were still very scared of the economy. They were out a job and had no good income. Nothing was working for them. If you watched the movie, the first two pigs were still scared even when they went inside the brick house. However, the third pig knew he would be safe and was not afraid. He knew the importance of his financial education and diverse passive income.
Are you ready for the Big Bad Wolf?
Are you ready for when the bad economy knock’s at your door? For some of you, it probably has already knocked at your door and maybe has blown your ‘house’ down. Today, the world has seen outrageous economic tragedies. People have lost their jobs, no income is coming in, and they have to rely on the government to provide aid.
In life, most people make fun of the people who take the time to work hard now and do not go out and ‘play’ with everyone. They say, “You have been working so hard, you need a break in life.” However, the smart people, people who take the time to understand the importance of their financial education and passive income, are preparing themselves for when the storm hits. They do not want to worry and suffer when something terrible happens.
Passive income and financial education gives a person the freedom to relax from the troubles. Although they might lose some passive income in the short run, they have fully educated themselves and know what to do in emergency situations. They know how to replace the bad investments with more good, solid investments.
Learn from the mistakes of others as well as your own. The best teacher in life is your mistakes. You are most likely to never make the same mistake twice!