Why Tech Employees Need Passive Income and What Passive Income Really Is

We Work Hard.

As a technology employee, you work hard. Really hard.  I don’t know anyone who works in tech and “phones it in” in my entire network.  Why is that?  

When you work for a software or hardware manufacturer, you solve challenging problems daily, using a complex set of tools, and have to do it on the clock, at speed.

These are the table stakes. And that’s not counting all of the other challenges that can arise on any typical day.

There Are Challenges Around Every Corner. 

On any day, you can have very challenging customer issues, you could have trouble selling in the middle of a pandemic, or your latest solution that you thought would give you success, instead fails.

As a manager, you could be having people challenges. Maybe two people can’t get along, or you have the employee that is great at what they do but is driving everyone nuts.

You could have gone through an IPO and now are trying to keep everyone engaged in their day to day as they have just experienced success. 

That Is a Lot, but This Is Normal and What I Signed up for.

Okay, how do you manage that month over month and year over year?  Every day you are living the baseline intensity that comes with your job and handling those additional problems.

What if you want to get promoted and take on even more responsibilities?  

More Risk, More Reward! 

That could be the answer. With more experience, you can take on more responsibility and make a more significant impact. Climb on. Gain altitude and the shares that come with it. You find the best companies and invest your time.

The question remains. How long will this continue? How many companies can you work for at that pace before you take on one too many? When does it all become too much? The burnout is real.

Wait. Stop This Company. I Want to Get Off.

Often it can be in the middle of a role or a big project when we realize that we can’t push the rock up the hill. 

The Burnout is Real! 

The technology lifestyle is fantastic.  Don’t get me wrong; I am bought and sold; it changed my life. However, the pace can wear people down quickly.   While not overnight, It will break you down slowly and pull you into a vortex of being “on” 24/7 and continuously plugged into the matrix.

Experiences I Have Never Seen. 

The highs are very high. Experiencing an IPO or launching a game-changing product is an incredible experience. When you are with a group of trusted co-workers that have been working long and hard to serve customers and provide game-changing technology, there’s nothing like standing arm and arm and watching your company float on the NASDAQ. The sensation is unreal. 

Don’t Forget the Long Nights in the Dungeon.

The long nights are also long nights. Being at work while your family is at home, you want to be with them, but you have to meet a deadline and get it right.

You can’t compromise because thousands of customers could be impacted by what you’re doing now. Concentrate and don’t lose focus. Yet you also don’t want to lose those moments at home with your family.    

In Tech, the More You Work, the Higher You Climb, the Greater the Toll It Can Take if You Let It.  

Working in tech is mind-bending. You get a front-row seat to the changing world. There’s nothing like it.

Like anything in excess, it can take control and take you to a place you don’t want to be.

  • The non-stop 24/7 always on. 
  • It is my job or my family. 
  • Need to solve the next problem. 

Enough Already! What Is the Antidote?

It is a good news & bad news situation. The good news is there’s an antidote.  The bad news is that this is a Morpheus Red Pill vs Blue Pill situation. 

Hold onto your hats. 

The Good News 

Let’s start with the easy stuff and put a win on the board. As technology employees, we have a solution that can get us out of here. It is called Equity Compensation.      

More than any other industry, we can be employees and part owners in the companies we work for. Being an employee and having ownership shares is tremendous! 

Now is the time to break out in dance and shake it. Yes! We can do this!

Show Me the Equity! 

Keep in mind working for Equity and actually saving it is not easy. It takes discipline and focus, but it is possible. My first book, “From No Dough to IPO,” will provide some insight into a framework you can use as well to get some good equity. Get the deets here: www.NoDoughtoIPO.com

Only with some solid skills and picking the right company as technology employees can we get Equity in addition to our paycheck. Earning allows us to save more money and think about planning a different kind of life for ourselves.

Equity, Check. Now What?     

Equity is in addition to your paycheck, so the trick is if you invest your Equity wisely, then you can accelerate your road to financial independence.

Diversifying our equity into other investments allows us to have the accelerant we need to become financially independent.      

With a modicum of discipline and some straightforward know-how, you can invest your Equity and travel a path to a better quality of life.  

Let’s Cast a Vision, Shall We? 

What if our careers were a series of four-year sprints with some sabbaticals in between. There was some pace to what we did, so it was not an all-out sprint all the time, but a series of sprints.   

Could we also understand how to move between being a consultant and W-2 employee to provide more flexibility to our lives and schedules?    

What if we could work from anywhere? 

What if we could create an income stream to replace our paycheck so that we can decide on what we work on and what we don’t? 

All of this is possible while working for technology companies. Like anything in technology, it will take some planning, iterations, and solid execution to get it right.  

Ok, you have the vision.  You are with me.  We can live the lives of our dreams and have the ability and means to do it.  What could be so bad?  

Lies and False Gods.

Yes, it sounds ominous, and it is. Many of us in technology have not broken through the ultra-rich stratus sphere; let’s say 10 million dollars or more.  We live in this wealth management purgatory that is keeping us from our goals.  

An industry wants to prey on our success and keep us from the promised land of what we just spoke about. They are given power by the failure of the United States education system to educate us on finances.  

Our reliance is on them because we find it taboo to talk about money at all.  How to make it, use it, or invest it.      

Without the valuable education we need, it is easy to fall into this trap and believe everything they say. 

Red Pill or Blue Pill? 

There is a choice. You can choose to take the “red pill” and unmask the “fast food wealth management” industry. See it for what it actually is and adjust accordingly. Alternatively, you can take the “blue pill” and just go back to sleep.

Blue Pill. Do What They Tell You.

The Blue Pill will tell you that stuffing all your money into your 401k, IRA, and brokerage account with someone with no incentive to make you money will make everything okay.

This option will keep you on the tech treadmill running to make more Equity and build the pile high so that you can, at some point, step off the crazy pace and relax.    

Relax, You’ll Get What We Want for You! 

With the Blue Pill, you are still firmly in the matrix and don’t have to take on the reality of your situation.  Make no mistake, they are in control and have your money. 

They will dispel fear to ensure they have a firm grip on what you have made, and they maintain their hold on it. I would advise that you stop reading now because the next section could make you uncomfortable.

Go Team Red

With the Red Pill, you’ll have your eyes completely open. The gloss and veneer will fall away.  Here is what you’ll see and discover: 

  1. Fast-Food Wealth Management: The fast-food wealth management industry is a sales-focused industry.   They want you to buy what they sell. Overpriced index funds, bloated life insurance, and high service fees. These fast-food wealth advisors make money bringing in more clients rather than helping you grow your wealth in the best way possible. (The AUM model for wealth management advisors focuses on getting new clients and not thinking about the best way to grow your dollars.)
  2. Asset Under Management: There’s no active management for Asset Under Management fees. The goal is to charge you double for what you could find from a Robo Advisor and give you half the service. What is a Robo Advisor? It’s artificial intelligence that will invest your money with the same techniques as a wealth manager. So, they convince you that you have a fantastic deal and don’t do anything with your money. 
  3. Incentives Aren’t Aligned: Whenever you give someone a commission for doing nothing, they’ll keep doing nothing. Fast-food wealth advisors get paid whether the market goes up or down. That means if your portfolio is racing to zero, they still get paid! They’re not incentivized to come to the rescue.
  4. Hire the Robots: “Fast Food Investing” is a commodity. To get someone to manage your portfolio across an index fund, do some light trading,  and add in some tax-loss harvesting or other items accessible to the hedge funds, just let the robots do it. They can do it for much less.

The Real Question is… Where’s the income?  

Now that you’ve been spit out on the concrete of some post-apocalyptic world, you’ll see, with eyes wide open, that the model doesn’t work. 

The math doesn’t add up. 

The model of putting all of your money in the stock market, where stocks provide growth and income from bonds, is broken.

Since the Great Recession, bond returns have been minimal. Like, low single percentage points. 

So this means the tried and true model of spending your 20s, 30s, and 40s in mostly stocks to grow your portfolio, then transitioning to bonds to generate income is fundamentally broken.  

Wait, My Wealth Manager Didn’t Tell Me This.

Why would they? Their game is about control. Who has control of your money? If they have it, then they make money whether the market is up or down. Whether your retirement is a success or a failure, they get paid.

But I digress. You took the red pill and want to know the truth. 

Face It. Bonds Will Generate No Income. Not the Income for the Type of Retirement That You Want. 

So Where the F#$% Is the Income?! Is It in Alternative Investments? 

Alternative. That sounds so… not normal.

Let’s go back to the early nineties when I was fed up with the crazy hair bands that took over “heavy metal.” When Nirvana came with Alternative Rock, as soon as I heard it; I said, “What have I been doing? Alternative is much better!”

It’s the same thing here. 

Stay with me.

Alternative investments, as described by Investopedia: 

What is an Alternative Investment?

An alternative investment is a financial asset that does not fall into one of the conventional investment categories. 

Conventional categories include stocks, bonds, and cash. Most alternative investment assets are held by institutional investors or accredited, high-net-worth individuals because of their complex nature, lack of regulation, and degree of risk.

Okay, red pill crew, let’s focus on a few things there. 

#1 the financial industry manages the language here. There’s no Oxford or Merriam-Webster to keep it fair.

Notice that conventional investment categories are stock, bonds, and cash. Another way is equity, income, cash. So in THEIR language—

  • Equity = Stocks
  • Income = Bonds 
  • Cash = Cash

So then, what are these alternative investments? Just like Alternative Rock, much better.

Alternative investments include all categories of real estate.

  • Single Family Homes
  • Multi-Family 
  • Self Storage
  • Industrial
  • Farm Land 
  • Real Estate Debt 

Other Hard Assets 

  • ATMs 
  • Art
  • Companies


  • Life Insurance Funds
  • Legal Settlement Funds
  • Music Royalty Funds 

It’s not all rosy. The reality is that alternative investments, just like the alternatives clubs in the 90s, don’t have the SEC governed market’s stringent regulations. This lack of regulation means that not all operators are created equal, and there are charlatans among the trusted.    

In our age of the internet, transparency, and education, you can find out who is cat-fishing and who is not with a bit of due diligence.

What They’re Not Telling You.  

There’s income in alternative investments. Alternative investment income is not a marginal 4%. I’m talking real income from 6% to 20% Cash on Cash returns. 

But wait, that’s not all. There are some key terms you have to be familiar with to understand all of this. 

Alternative investments generate passive income and passive losses. For the definition of passive income, let’s use the real thing. 

Passive Income as Defined by the IRS – What Is Passive Income?

Passive Income is earnings derived from a rental property, limited partnership, or another enterprise in which a person is not actively involved.

As with active income, passive income is usually taxable. However, it is often treated differently by the Internal Revenue Service (IRS). Portfolio income is considered passive income by some analysts, so dividends and interest would be considered passive.

However, the IRS does not always agree that portfolio income is passive, so it’s wise to check with a tax professional on that subject.

Okay, this means that income where you, as an investor, are not actively involved is passive income and has a different tax treatment. AND that does not include your stock portfolio. Hmm. 

Also, there are many other versions of passive income out there, but if you don’t meet the IRS rule, you can’t take advantage of what comes next.

Passive Losses

A passive loss is a financial loss within an investment in any trade or business enterprise in which the investor is not a material participant. You can write off passive losses only against passive gains.

When losses exceed the income from passive activities, the rest of the loss can be carried forward to the next tax year, provided there is some passive income to write it off against.

Wait, that was a lot; let’s unpack all of that. 

Alternative Investments where I am an investor generate passive Income as defined by the IRS. Boom. Got it. I am not actively involved in the day today.   It works great for us tech employees as we have a lot going on. 

AND passive losses are the financial losses associated with these gains. In real estate, this is depreciation against the asset or capital improvements. In specific scenarios, the loss is more than the gain. 

Using cost segregation and other techniques to accelerate and detail the investment and depreciation, you can have multiple years where your passive losses exceed your gain.   

Now for the real magic.  

Extra passive losses can be carried forward on your tax return. 

$100 in passive gains – $200 in passive losses =  No Tax and Move $100 losses to next tax year. 

Say What? Did You Just? Yes, I Just Described How Real Estate Investors Eliminate Some or All of Their Taxes on Passive Income (as Defined by the IRS). 

Yes, this is what all of the commotion is about. 

Tax-Free Passive Income.   

Let it sink in, and your imagination run wild. This Tax-Free Passive Income has some tremendous impacts. 

#1 – With Less or No Tax on Your Passive Income, You Don’t Need as Much Passive Income To Match Your Real Estate Income.    

If you make $200,000 a year, you have a tax bracket of 32%, so the rough math says you take home $136,000.     

So you only need $136,000 of passive Income to equal a $200,000 a year salary.    Tax protected passive income is so important to understand because, in the IRS passive world, you don’t need as much Income to match what is the take-home of your current salary. 

With the right investments, you can replace your salary with passive income. As you build an Alternative Investment Portfolio, you can start building a path to financial independence. 

How powerful is that? Here is more great news. You don’t need to produce as much passive income as your salary to replace your paycheck.

Financial independence is also another term that plenty of people use differently. For me, financial independence is not needing to work for a paycheck.  

The Opportunity for Tech Employees Is Simple. 

  1. Work for Equity 
  2. Convert your Equity to Alternative Investments 
  3. Leverage Alternative Investments to replace your paycheck. 

What Could You Do With This Knowledge? 

Could you live in retirement the way you live now? Probably if you start early? 

Without worrying about a paycheck, could you take a sabbatical? Yes.

What if you wanted to create your start-up or solve a problem you are passionate about?  You could do that too.   

All of this is available to you if you take the Red Pill. 

It seems straightforward that as tech employees, we all need real Passive Income in our portfolios. 

Want to learn more?

Join my email series where I’ll be uncovering untold secrets fast food wealth managers won’t tell you and revealing strategies to get you the type of retirement you deserve.

If your eyes are open and you understand that what we’ve been taught won’t allow us to retire the way we’d like to, join us on this journey.

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