Passive Income Greater than Your Burn - This is How You Get Peace and Dignity | Investment Moats Skip to Content

Passive Income Greater than Your Burn – This is How You Get Peace and Dignity

Scott Galloway is out with his new book, and in a smashing podcast, he brings up a tale about his father and his close friend:

 

What is the definition of rich?

When your Passive Income is Greater than Your Burn.

Those of you who are ages younger than 40 to 50 years old, you should be focusing on “the Top line“.

You would want this figure to be bigger and bigger.

Scott has a close friend who is a partner at the investment bank. He manages 200 investment bankers. He makes roughly $5 to $7 mil a year.

After all the taxes for staying in Manhattan, he takes home like $3.5 mil.

He has to pay alimony and child support for previous marriage, a town house, and a house in the Hampton.

Out of the $3.5 mil, he spends… $3.5 mil.

He has increase his standard of living as he earns more.

Scott noticed specifically that his close friend has a problem sleeping. This is because what happens if there is a re-allocation of capital from mergers and acquisition and into passive investing.

That very possible reality is going to affect his “Top line” and he has a Burn Rate that equals that.

In contrast, Scott talks about his father and his wife.

His father’s pension from the army and Social security gives him $48,000 a year and his burn is $40,000 a year.

By Scott’s definition, his father is Rich.

Young people should focus on their income.

Adults focus on burn.

They should think about: How do I chart a path that I can get to in investments, whether it is rental real estate, income from dividends stocks, forced savings, so that I will have a realistic passive income that is greater than my burn.

Adults should think about moving to less expensive, and to tamper with their expectations of the lifestyle they lead.

There is a real peace and dignity on being rich.

And rich can occur on $48,000 a year.

I thought this short but too good not to share. And this is applicable because in terms of earnings and lifestyle, Singapore have a certain group of people that would fall in an equivalent category. They have done well in their career and have build up a great top line.

Their Burn however, can be in such a way that 15 years from now, they would ask “Why the fxxk did I choose to allocate my Top line that way!”

On Happiness

I wrote about Scott Galloway on his equations for Success and Happiness here. I am also a fan of his explanation on the power shifts in Amazon, Apple, Google and Facebook.  

In this podcast interview with Jordan Harbinger, he promotes his book The Algebra of Happiness: Notes on the Pursuit of Success, Love, and Meaning. I think this will be a book that may be worth it to buy a hard copy just to pass it around. 

Professor Scott Galloway explained a lot of how he sees things in this interview. It is just worth it to re-listen again to think about some of the things he says.

Perhaps what makes his fascinating was that throughout his life, he did a lot of things that a fundamentally sound person will not do. In a few parallel universe, he might end up being a wasted person in this world, and he is cognizant to realize that what he has now, depend on a lot of effort, but also a lot on luck. 

By being born in America and not in some other countries.

You can listen to his views on:

  1. Our Caste System – Success is based upon a Caste System of which University and Network you subscribed to 
  2. How what made it possible for him is not available to this generation now (which again, shows how lucky he is)
  3. On Hunger and on this thing called Passion
  4. On his very Viral Class Rule
  5. On his experience with the lack of money and lack of contacts, options resulted in him forming an opinion, and an unbalance chase for money and power
  6. On this obsessive entrepreneurship culture and the appeal of having a good job versus starting business

Do Like Me on Facebook. I share some tidbits that is not on the blog post there often. You can also choose to subscribe to my content via email below.

Here are My Topical Resources on:

  1. Building Your Wealth Foundation – You know this baseline, your long term wealth should be pretty well managed
  2. Active Investing – For the active stock investors. My deeper thoughts from my stock investing experience
  3. Learning about REITs – My Free “Course” on REIT Investing for Beginners and Seasoned Investors
  4. Dividend Stock Tracker – Track all the common 4-10% yielding dividend stocks in SG
  5. Free Stock Portfolio Tracking Google Sheets that many love
  6. Retirement Planning, Financial Independence and Spending down money – My deep dive into how much you need to achieve these, and the different ways you can be financially free

The Permanent Portfolio Might Do Worse in Retirement than the Traditional Equity Bond Portfolio
← Previous
The Minimum Basic Standard of Living for Older Singaporeans Report was Useful for Me
Next →

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Temperament

Friday 31st of May 2019

When i read that book i understand than it is correct not to envy the Joneses staying next door who seems to have all the material possessions of this world.

Neither should U look down on old mother hubard who seems barely has anything to show from her cupboard. Only if she shows U, her account in the bank then U will know who is the real Millionaire living next door. Yet she drives a bone-shakle.

But then what's the use of money when U can not bring it with U to the other side?

Use it or lose it or leave behind for someone to use.

i think this is also one paradox of life.

No?

Money is never yours until U have spent it.

Lim

Friday 31st of May 2019

As mentioned in "Millionaire Next Door", be a persistent accumulator of wealth instead of an under-accumulator of wealth. I note that "Millionaire Next Door" has stood the test of time and recently a 2nd edition was released.

Many financial advice books never make it to a 2nd edition. Looking at the synopsis of Scott Galloway's book, its just 'common-sense' advice & similar information can be found for free in blogs like investmentmoats. Also unclear how much original research was done specifically for the book. Unlikely to make it to a 2nd edition.

Kyith

Monday 3rd of June 2019

I think Scott's book is based on his personal experience. But it may contain some advice that is hard to swallow. It is likely based on the way he writes, it will be brought to the front and not be drown out by noises.

Strangely Millionaire Next Door didnt work for me. Didn't really connect with me. I know recently there is another book on the similar vein out. Forgot the name.

Thomas stanley's daughter share things about this second book. The result seems a little different this time around.

Edwin

Friday 31st of May 2019

Such stories are indeed enlightening but we should examine more closely such premises. Technically a person who makes 10k a year but who is single, childless, homeless, and survives solely on freegan food is likely to have a burn rate less than 10k. But it would be absurd to call such a person "rich" by any stretch of imagination.

It is clear that the definition of rich still requires drawing an arbitrary red line across "minimal quality of life".

The problem here is different people have different notions about what is "minimal" quality. And who is to say one's notion of minimal is more correct than others.

Createwealth8888

Friday 31st of May 2019

Rich and wealthy; rich or wealth. They are different!

It is a joke to call freegan rich and wealthy!

Temperament

Friday 31st of May 2019

I think most people will know that.

The only thing is "MONEY NOT ENOUGH".

This site uses Akismet to reduce spam. Learn how your comment data is processed.