Tired of working for more than 8 hours a day? Concerned about your financial future? Like to know how to be more comfortable? Then know about passive income.
What is passive income?
Passive income is a type of income that one earns through very minimal effort or investment. In comparison active income involves selling one unit of time for a unit of money, be it an hour, day or year – you are selling your time for an income stream. Otherwise, you don’t earn anything. Although an often misunderstood part of passive income streams is that they can actually type quite a lot of time and energy to set up, but over time you are not selling a part of your time for a unit of money.
There are many reasons why passive income is advisable. First, it’s the ultimate key to financial freedom. Active income is something that you earn when you’re working such as your monthly salary. As expected, it tends to stop once you reach retirement age, become unemployed, or close your business. While passive income allows you to earn even when you’re sleeping!
So passive income is more about wealth creation rather than just another income source. It’s about utilizing leverage and scalability in how your time is applied to generating different income streams.
Types of Passive Income
Stock and Shares
Investment in the stock market has been a very popular form of passive income for many around the world. People generally take a mix of both trading and investing. The former is more of an active income approach through regular buying and selling where as the latter tends to be a more longer-term passive approach – and its important the know the difference between the two. And although trading tends to be more of an active income stream, through the use of automation and systems it has many of the attractions of passive income work in that it allows you to be very mobile, it can be leverage and scaled and income can be earned even while you not actually at the computer engaged in the process.
Mutual funds are, in general, pooled resources. A mutual fund manager invests the money in different portfolios such as stocks and bonds, and you earn a dividend income or interest (if you’re into bonds) from your invested funds. Today there are hundreds of different kinds of mutual funds available to the retail investor assuring there is a suitable one out there to meet your financial goals and preferences.
Earning passive income online through an e-commerce website, text link marketing, AdSense, contextual advertising, e-book creation, webinars, and e-courses is growing all the time. They provide a means for people to learn new skills and to earn income streams from multiple sources and often in quite short spaces of time.
Real estate, such as lands and houses, can also be a source of passive income. Unlike cars and other types of assets, homes and land often appreciate over time and so produce capital gains but also enable you to generate passive income through rentals.
One of the easiest ways to earn passive income is to place your money in the bank, where it can earn interest income. You can open a classic savings account, time deposit account or foreign-dollar account and earn a regular income stream. Although with interest rates as low as they are at the moment the amount of passive income is significantly down from what could be earned in the past.
Sell your products online, earn through referrals, or build a team with equally driven people who can increase your market reach.