BY DR. GLENN MOLLETTE
Creating passive income is lingo that you have probably heard or thought about more than once. Generating an ongoing flow of cash that keeps coming is welcome by most of us. Seminars are often held by different entities explaining their technique for building a steady stream of income. All of us need money so it is usually a topic of interest.
Years ago, a friend influenced me to sign up for Amway. He was doing great things and lived well. I signed up. That lasted maybe a month or two. I did not make any money from it, but I admit I gave up quickly. Later, another friend influenced me to sign up for a telephone pyramid scheme. Supposedly, people were making money. After about two months, I lost interest.
On another occasion, I signed up to sell vitamins. This time, someone was reporting about how it helped people with multiple sclerosis. My wife was very sick from the disease and I was willing to buy or try anything that would help her. The vitamins did not help her and I gave up on the vitamin business.
The old adage that if it is too good to be true then it probably is, is accurate most of the time. Occasionally someone wins the lottery and occasionally someone is struck by lightning.
When I was 18 years old, I was working for a little country church. My only deacon, Harold Rice, said, “Glenn, we are going to enroll you in the annuity program operated by the Annuity Board of our Southern Baptist Convention.” Today, it is called Guidestone.
“We are going to put $6 a month into your account,” he said.
That contribution probably occurred approximately 12 times. I moved on to college. About 13 or 14 years ago I remembered that and called to see if an account like that even existed. The account did and it had grown to $30,000. I was shocked.
A year or so later I took the fund out and invested it into an index fund, which at that time was Ameritrade and now Schwab. The account has grown to $90,000.
Yes, I am talking about over 50 years of growth. The dividends were reinvested every year. The dividends from that little fund today are an ongoing passive income.
The best way for you to develop passive income is to work a job and put some money into an Individual Retirement Account every year. I like a Roth IRA best because once you have paid tax on it and invested it into the Roth, it will generate income that you never have to pay tax on again.
At age 25, if you start putting $5,000 in a Roth IRA every year until you are 60, your fund could easily total about $1.2 million. At the young age of 60, that account could easily produce $12,000 or more of income for you. This is really passive income. Then you can keep working or play golf every day.
Nothing is free and easy but you do not have to make a huge sum of money to put $5,000 a year into a Roth IRA. You may have to skip eating out some or pass on a few vacations. You might have to drive an old car longer and avoid credit card purchases. Any sacrifice you make will be worth it later in life.
Dr. Glenn Mollette is the author of 15 books. He is a graduate of Georgetown College, Southern Baptist Theological Seminary (Louisville, Kentucky), Lexington Theological Seminary (Lexington, Kentucky), and is the founder of Newburgh Theological Seminary (Newburgh, Indiana). His column is published in over 600 media outlets nationally.