A Passive Income Portfolio

Would you believe that two people could earn the same amount of passive income, face the same expenses, and, after a couple years, have dramatically different net worths?

What made the difference?

It’s their money management practices.   

Guidance from My Mentor

One of my mentors, Eric Shelly, recently shared his thoughts on how to construct a passive income portfolio that would advance your financial freedom.

I was blown away by this because I didn’t know I was supposed to do more than just get enough passive income to cover my monthly expenses.

I’d not thought beyond this point, and now that I know there’s more, I’m digging to learn.

Want to follow my journey?

Here’s What He Said

Eric said, yes, you want enough passive income to cover your monthly needs BUT you need to build in a buffer to cover unforeseen discretionary expenses.

Also, if you want to keep growing your net worth, you’ll need some investments that grow in value as well as produce cash flow.

Specifically, Eric suggests that you create three buckets of capital:

  1. Cash Flow Bucket – which should consist of dependable monthly payments that cover your monthly expenses and some discretionary spending. Food, shelter, utilities, and transportation costs should be covered by consistent cash flowing sources like notes, furnished and traditional rentals, and short-term funds.

    Now, when your expenses are covered, you can use additional income to build your net worth.

  1. Cash Flow and Appreciation Bucket – which includes mostly real estate syndication deals. These deals usually pay a quarterly revenue plus they are appreciating through value add and inflation. They represent an inflation hedge, as well as an opportunity to increase your net worth upon sale.

Now that you’re somewhat protected against inflation, you can start speculating and take some bigger risks.


3. Appreciation Only Bucket holds the funds for your “homerun opportunities” such as venture capital, or real estate speculation. These high-risk investments should be limited only to money you can afford to lose.

What’s the Big Deal

I’ve got to confess; I’ve only knew about Bucket 1. That’s been my target. I didn’t know there was more to it.

Much has been written about the FIRE movement: Financial Independence, Retire Early. But did you know there’s more to it once you reach that milestone?

But Eric is right, if I don’t create Bucket 2 (Cashflow and Appreciation), I’m going to fall behind.

And then, to make a quantum leap forward in my net income, I need some big wins.

I really do need to get stable enough to take some Bucket 3 opportunities.

New Journey. Are You Coming Along?

I’m going to grow, and you can as well.

If you don’t have any passive income, then I strongly suggest you get a few extended stay rentals. Check out my coaching and training program to get going.

After that you can start contributing to Bucket 2. I’ll share what I’m going to do to help you with some ideas.

And of course, it’s wise to place a little into Bucket 3 (only the amount you can really afford to lose).  

I’m going to start funding some Buckets and I’m planning to do that by redirecting the money I waste on finance charges and inefficient cash flow practices.

Stay tuned for that.