How to spend on an overseas holiday but still have money?

In the current society we live in, everything requires money. Or maybe we should say almost everything requires money. Besides our daily necessities, as humans, we also desire to spend on luxuries such as an overseas holiday, eating out at restaurants, buying a car etc. We have heard of the need to save and save. But the truth is, we still need to spend and we want to spend on some enjoyments. Now, how do we spend on enjoyments but still have money after the indulgences?

An overseas holiday

An overseas holiday is what most of us will go for if we want some enjoyment. A holiday to Europe probably will cost you a few thousand dollars. Most of us will try to save up for a few months before going for an holiday. After spending that few thousand dollars on that holiday, we're back to square one. Our bank accounts are empty again.

Now, hear the good news. There's another way where we can spend on that holiday but our bank accounts will never be empty. This is probably what rich people practice which enable them to stay rich. The rich get richer and the poor get poorer.

I first read and heard of this method from Robert Kiyosaki's various book including his best selling book Rich Dad Poor Dad. It is a book which changed my mindset on money completely.


The 2 different approaches to spending for an overseas holiday


Savings for a holiday

Before going into the methodology that the rich practice, let's look at what most poor or middle class people do:

As we can see above, most will have a salary from their job and they will save and spend certain amounts. After they have saved enough, they will indulge in some enjoyments such as an overseas holiday. It will be hard for this person's savings to grow as after they spend on that holiday, their savings account is empty again.

Passive income for a holiday

The next person also has a salary and also saves and spend a certain amount. The difference now is this person uses his or her savings buy assets that generate income. This extra income generated from the assets bought can be used to supplement the indulgence on an enjoyment. In this case, we use the example of an overseas holiday again.  

The above person continues to use his savings to buy assets that generate income. If he does not use all of the extra income on the holiday, the extra income goes back to his savings and it continues to grow. With the extra savings, this person can buy even more assets which generate more income. The extra income which is generate can grow exponentially and this person may have free money for indulgence for the rest of his life. 

How to create passive income?

Passive income is a powerful concept. However, it is not taught to us in schools or in the corporate world. Most of us will only know we need to work hard, save money, spend below our means etc. But, somehow we do not like the idea of saving money just for the sake or saving money. There needs to be a purpose to saving money.

With the concept of passive income, saving money has a purpose. That purpose is to buy assets that generates income. When I want to go on an overseas holiday, I will seek to create passive income for that holiday. After enjoying the holiday, my savings is left untouched and the assets I bought continues to generate more income even after I went on that holiday. 

The assets that generate income can be from stocks, properties, business, intellectual property such as books or websites etc. Let's take the example of stocks. If you use $50,000 of your savings to buy good stocks which gives an estimate of 6-7% dividends on average, you'll get an extra $3000-$3500 a year in passive income. This amount should be sufficient for you to travel to some countries. The more money you have, the more passive income you can generate from stocks. 

There will be people who invest in properties and rent it out. They receive rental income which is also a form of passive income. Then there are also people who start their own business, create products, write books, start a website etc. All these will provide extra income for you. The key is to know where to focus on and find out the ways to do it. If you can do all, that will be even better as passive income will come from all different places. This is called multiple streams of income.  

The magic of passive income

Passive income is different from the active income we get from our salary. It simply means that even if we lose our jobs now, our passive income still remains while our active income stops. If we build it correctly, passive income can grow larger and larger until it replaces our active income. It takes awhile to build but it will be worth it.

The next time you think of having a holiday, think about how to create passive income for that trip. This is the first step to many great things ahead. You will be able to experience another realm of spending which is different from the traditional way of spending.

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Related Posts:
1. Income and expenditure update for the past one year plus
2. Being rich the easier way
3. How the rich manage their money that the poor and middle class do not - Part 1

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