What Is A Private Income?

Private Income – My First Impressions

(This key article also appears on the homepage of this website)

I was only a young boy when I overheard a conversation between my parents that referenced the phrase “private income”.  It went like this:

Father: “I’m not sure how Mr W finds time to sit on all those committees and write all those books”

Mother: “Remember that Mr W has a private income dear.  That gives him the time to devote himself to writing and sitting on committees and such like.”

Father:  “Oh yes, I’d forgotten he has a private income. That makes sense then.”

I was instantly intrigued about what a private income was. So I asked my parents what a private income was. Their answer was as follows:

Father: “It means he gets his money from other places, not a job. He does not have a regular job so that gives him lots of time to do other things.”

Me: “No regular job!? What other places does his money come from if he does not have a regular job?”

Mother: “I’m not sure dear, that’s none of our business. Mr W is from old money. Off you run now.”

Listening into adult conversations was something my parents did not rate as a virtue – far less so me asking questions about the conversation. So I obediently made myself scarce, however my young brain was instantly alight with curiosity around the concept of having a private income. That curiosity about private incomes has never left me.

I never did find out what Mr W’s private income actually was, however I now surmise that it was most probably a combination of income from inherited wealth via land lease income, office building rental income, share dividends and bond disbursements. Mr W was “old money” after all.

Private Income – An Abiding Fascination

Typically, when fobbed off by my parents about any topic I was enquiring about, I’d quietly turn to others and ask the same question. I enquired as to what a private income was with numerous adults from that time forward. I asked my school teachers, neighbors, uncles and aunts, adults at church and even my childhood doctor (much to my mother’s horror). I did hear the phrase “what a strange little boy” on many occasions though.

The responses varied as to what a private income was, but the impression grew in my mind of someone that was rich, living-off-the-interest, idle, unrelatable, upper class, snobbish, self-important, had no money worries. Some answers I received were just eye-rolls or a derisive snort.

The impression I was getting was that the adults in my life could not fully explain what a private income was and were also uninterested or even plain disapproving. So I stopped asking.

However, my curiosity did not diminish – there was clearly some undiscovered truth to be unearthed and I instinctively knew that I must get an answer.

Private Income – A Lost Concept

Years passed and I never again heard the phrase “private income”. It was as if the concept had evaporated into thin air. In all probability, it was because I was living in a very insular working class environment where everyone’s money came from a job , hence why I never heard about the concept of passive income again. It seemed that even if you were rich like a doctor or politician, your money still came from a job.

I was in my late 20’s with a family of my own, debts and money responsibilities of my own too when I happened across the topic again (quite accidentally) with my landlord Mr S.

Mr S and I got chatting about careers and money (he had just kindly allowed me to readjust my rent payments to the pay cycle of my new job) and he mentioned in passing that money was not all bad, in fact, without money it would be very difficult to substantially help others. This innocuous comment from Mr S snapped my mind open again and realizing in that instant that Mr S thought about money differently than everyone else I knew, I immediately dug out my childhood question about the meaning of private income.

Now Mr S was an unassuming man, beige even. Mr S looked me in the eye, adjusted his tan button-up sweater, smiled at me kindly and said “Real wealth isn’t about new cars, fancy houses and fashionable clothing. Truly wealthy people don’t care about those things. They care about the freedom of not having to think about money, the freedom to live a quiet useful life and the freedom to confidentially help others and contribute to important things. In fact, most wealthy people still work.” My paradigm about rich people shifted in that instant.

Even though Mr S never did directly answer my question about what a private income entailed, he certainly gave me the information about what a private income really meant. The nuts and bolts of how to achieve a private income would come later, but without Mr S’s wise framing of what wealth is meant to be about, the details of how to achieve a private income would be pointless and meaningless.

Private Income – Found

These days, if you google “private income” you’ll not get too many useful hits. However, the internet is jammed packed full of other modern financial terminology like passive income, FIRE, FI, earn-while-you-sleep, value investing, wealth via frugality, or by trading futures or some other commodity, leverage, stock market, mutual funds, ETFs, crypto – some of it very useful, some of it snake oil, much of it written by someone funneling us to purchase or just plain not qualified to comment on the subject from a experiential premise.

Whilst there is certainly some excellent facts out there, much of it is noise – noise that changes its pitch and tune depending on the prevailing news. I’m certain I’ve read most of it over the last 20 years …. well at any rate, it sure feels like I have!

A private income is not a single definable thing. Yes, it incorporates the concepts of true passive income, yet I hesitate to label it as just passive income as the modern meaning and application of passive income is swiftly morphing into something unwholesome that smells of get-rich-quick and no-effort-required. A private income is certainly not that, it is so much more.

The meaning of a private income is to be found in the lives, businesses, investments, causes, money habits and life views of unassuming old-money individuals. These old-money people and families rarely write blogs, publish books or give lectures about their private incomes. Why not? Because nobody is interested! At first glance, the concepts of creating a private income look utterly unsexy, mundane and plain boring – boring like the ugly rough shell of a pearl oyster, dull and dusty like the uncut opal, muddy and dirty like gold lode or inaccessible and full of sludge like an oil well. Most people will walk on by.

The fact is that private income people and the knowledge about how to create and maintain a private income are hidden in plain sight. It is likely to remain that way too because most people are not willing to shuck the oyster to harvest the pearl – they just want to buy the pearl for money they earned at a job.

A Private Income – What We Get

In essence, a private income gives its holders the following:-

1. A steady reliable flow of real cash from more than one source, with little to no ongoing input from us.
2. This cash flow covers all our basic needs and living costs as a minimum.
3. A cash flow outlives us and will continue in perpetuum and nurture future generations.
4. The freedom to no longer have to think about where the money is coming from.
5. Assets in the background that quietly hold or increase their value in perpetuum, whilst still creating tangible liquid profits.
6. The freedom to spend our life in a meaningful way that improves our families and society.
7. The freedom to purposefully follow a career, or build business, or create a product, or develop a service that directly contributes to society.
8. The larger the cash flow from a private income, the wider its uses besides just our own needs.
9. An environment to create a mature purposeful life, without the bulk of our time dedicated to working to pay the bills and fund our spending habits.
10. A private income allows us the priceless commodity of personal privacy.

I discovered the actual practicalities of creating a private income later in life. Yes, if these practicalities were discovered earlier and applied at the time, my private income life would have happened sooner. However, I fully believe the benefits of a private income, even in part, are deeply meaningful and worthwhile.  That’s why I’m sharing what I know as I learn it and apply it. 

Building and having a private income is at the peak of becoming a mature adult.

Only when we cease to become reliant on a job for our basic needs in the same way a child grows to no longer rely on their parents for food, clothing and shelter.

Most will walk on by the topic of building a private income, I know that, but the information is here free for all regardless.

Cheers

Hugh Walker