Can Your Passive Income Earn You More Passive Income?

Wealth Snowball

By now we all understand that a key aspect of building wealth is hitting a certain critical mass point or “wealth snowball”. Some call it FIRE (Financial Independence Retire Early) others call it the nest egg. You see, people like Warren Buffett have said for years that the hardest part is saving and investing that first $100k to $200k. After this point a few things happen. First of all, you have developed many of the habits and practices required to save, invest and build wealth. These habits are almost securely fastened into your life and psyche. Secondly, the initial nest egg begins to produce passive income and compound. See our related post on how we tripled net worth in 10 years by harnessing the power of the Investing Trifecta!

Passive Income Machines

After that first couple hundred thousand, the nest egg can be converted into a form of passive income machine. Now obviously, a person will want to continue to contribute and build on that nest egg for many years until they reach the level of FIRE they are searching for:

What next?

But what comes next? How about finding ways to have your passive income produce more passive income. In other words, place the passive income into other machines that can produce even more passive income. A very simple example of this is a dividend reinvestment plan or DRIP. This is when the dividends are reinvested back into the stock to buy more stock. Through the passive income you are strengthening the passive income machine. This starts to really build massive amounts of wealth if a person gives it time. Time was Warren Buffett’s best friend.

Therefore, here are a couple of other ideas for plowing passive income back into passive income:

 

1. Earn Money Back from Cashback Apps

  iBottaibottacashback_rewards paypal

Saving Cash Back Strategies To Reinvest

There are many ways I like to save and earn money. One of my favorites is by using apps like Shopkick and iBotta combined with cash back credit card rewards. Here is a summary of the cash I’ve “earned” recently weekend by scanning receipts getting cashback deposited to my PayPal account:
  • iBotta – $20
  • Shopkick – $5
  • Costco 2% Member Rewards – $70
  • Cash back earned from credit cards – $18
Total: $113 Therefore, if I used dividend income to buy these goods I needed anyway, I would be earning even more back/passive income.

2. Invest That Money Into a Monthly Dividend Paying REIT

While this is not a lot of money, if I continue to keep earning rewards like I have been this month, I can continue to invest in Realty Shares dividend producing REITs each month and let my passive income earn me more passive income! Tomorrow, when the market opens, I plan to buy 2 shares of O (Realty Shares) $64.65 x 2 = $129.30. With a 4.45% annual dividend that pays monthly, my rewards will pay $5.75 yearly or $0.47 a month. For more on REITs check out REIT’s Great Addition to Portfolio For Income.

Conclusion

This is just one example of how passive income can waterfall into other passive income machines. This is a great strategy to deploy on your way to FI!

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