I couldn’t help but talk about a major lesson that needs to be emphasized in the wake of Tropical Storm Fay.

That lesson is the importance of attaining passive income. 

As you probably know, when a storm like that hits (even if it’s just a tropical storm and not a hurricane), you have to deal with unanticipated problems and issues.  Because I’m from South Florida, I’ve experienced my share of hurricanes and tropical storms (including Hurricane Andrew back in 1992).   

The issues that arise when a storm hits can range from annoying to downright painful.  You may lose electricity.  Trees can be uprooted.  You can have gas shortages.  Windows can break.  Roofs can be blown off.  Businesses and jobs can fall into jeopardy.  Flooding.  You name it.   

It’s not a pretty picture.  Your whole life can be thrown into disarray, and if you don’t have financial security, you’re in for a load of trouble. 

This financial security doesn’t simply come from having money saved up in the bank.  Rather, you need a consistent and steady stream of passive income.  Here are just two reasons why passive income is necessary to protect yourself in these types of situations or in any disaster-scenario situations (like a terrorist attack):

1) Insurance doesn’t cover everything.  I have homeowners’ insurance, but it’s not like I can rely on it to cover all the expenses associated with damage from a storm.  For instance, we have a high deductible with our policy . . . something like $6,000.  That means that, if our roof blows off during a storm, and we need $30,000 to replace it, the insurance company will only cover $24,000.  We are responsible for $6,000 (our deductible). 

Do you have $6,000 sitting in your checking account?  Are you willing to put $6,000 on a credit card?  Do you have enough space under your credit limit to do that?

In addition, insurance covers our home, not other expenses that may arise, like pricier gasoline, staying in a hotel (so that we don’t have to deal with 90-degree heat in a house without electricity or air conditioning), removing uprooted trees, etc.  If gas jumps from $3.79/gallon to $5.00/gallon or $6.00/gallon, some people will be in a load of trouble. 

2) Jobs may not be safe.  I work for a large international law firm in a tall skyscraper, so it is unlikely that, if a hurricane rips through here, it would jeopardize my job.  But the majority of people work for smaller businesses, or they might be self-employed. 

What if you are an office manager for a local doctor’s office, and a storm destroys the office complex where the doctor’s office is located?  What if, without revenue for one month (as the doctor finds–and spends money finding–another location to see patients), the doctor cannot pay you? 

What if you own your own dry cleaning business, and a storm causes massive flooding in your area?  You can’t get to your business because the flooding prevents you from driving to it.  Other people can’t get to it either.  After 2 weeks, as the waters recede, you finally get there but find that your equipment is damages.  You have to order new equipment.  After another week, you’re finally back up and running.  But you can’t jump start it because people who normally come in and give you business are out taking care of their own problems that resulted from the storm. 

Can you go one month without income?  Two months?  The majority of people live paycheck to paycheck.  The security of a job vanishes in these types of situations. 

If, however, you had developed ways to make passive income (like owning a rental property, income from membership-style website, or ebook sales, etc.) and had, say, $1,000 or $2,000 per month in consistent passive income, a disaster like a storm, flooding, or a terrorist attack wouldn’t affect you as badly as other people. 

A steady stream of passive income would cover unexpected expenses and provide security in case your job becomes unreliable.  Saving money isn’t enough because it runs out.  Passive income, however, doesn’t run out. 

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