What Is Passive Income?
Passive income is the income that can be obtained automatically without spending much time and energy, and without taking care of it. At first glance, it looks a bit like “getting something for nothing”. Passive income is a kind of income that can be earned regularly with little effort to maintain.
Passive earning is a source of income that you can still make money without actively working. Active income requires work, time and energy are exchanged for it. Passive income has these characteristics, even if you don’t work, you don’t need or need to spend a little time to get it, and it’s generally a continuous income.
Passive earning is an income that can be obtained automatically without spending much time and energy, and without having to work.
The first thing that most of us come into contact with is the salary income that is exchanged for time and labour work, also called active income.
Warren Buffett the famous investor once said, “If you don’t find a way to make money while you sleep, you will work to death!”
Why Passive Income Is Important?
When you quit or are fired, the active income will stop. For any source of income, there will always be risk factors. Therefore, it is wiser to create multiple sources of income. The creation of passive income is firstly based on active hard work and steadfast dedication, and enjoy the fun of passive income without affecting the work of your active income source.
Passive Income Vs. Active Income
Many people are confused about the difference between active income and passive income. They are both making money. What is the difference between the two? Active income refers to labor income, and Passive income can be broadly understood as being able to earn income when you are not doing your job. If your passive income covers your daily expenses, then you can also be considered free.
Active income is generally fixed like your salary. But a passive income is not fixed, it could be less or more.
Passive income is any income that can be passively generated without a lot of work and maintenance. The biggest difference between active income and passive income is that the money you get from active income is proportional to the labor you put in; while passive income is the money you get, not necessarily in proportion to the labor you put in.
6 Simple Ways To Earn Passive Income
Einstein once said, “Compound interest is more terrible than the atomic bomb. Learn to invest early and let the compound interest of money help you make money 24 hours a day”. Passive income also has the same potential, it not only generates income for the present but also keeps on generating income for the future. Most passive income streams do not require constant work and time, it’s all invested in the start.
1. Dividend Income From Stocks
Many novices have poured in to try their luck in the stock market, as this is the easiest way to let your money generate more money. This does not refer to “stock trading”. Stock trading requires an investment of time and effort and is risky. This refers to long-term investment, to identify a high-quality stock, hold it for a long time, and profit through dividends or long-term appreciation. Profits are more than savings, and risks are lower than loans.
2. Rental Income
Rent is one of the easiest ways of generating passive income. People can rent extra space in their houses, or offices or even the extra garage space to earn a reasonable monthly rent. The rental income generated from commercial properties is the highest, so if some are willing to take it as a business, then investing in commercial properties would be the best decision as they are easy to rent out.
3. Own A Blog
If you are just starting your blog, affiliate marketing is unlike the easiest method to monetize your blog. It does not require a lot of time to set up and requires minimal effort. Many people are confused about how affiliate marketing works, but it’s as easy as just pasting a link on your blog. For example, if you want to promote a weight loss product, writing weight loss tips on a blog is an easy way to promote the product. And then you will copy and paste the affiliate product links from your affiliate platform, for instance, amazon, hostinger affiliate, etc many platforms provide affiliate links.
Even if you have, this is a good way to flow through to profit your blog. Once traffic is circulating on your blog, you can market anything. Many bloggers successfully sell courses online and get more passive income even from their active income sources.
4. Freelance Your Services
Nowadays freelancing is becoming more and more popular. There are many platforms such as Fiverr, Freelancer, Upwork, etc. that provide you opportunities to monetize your skills. One can provide personal professional skills as a consultant, content writer, website developer, etc, and can create a platform of never-ending opportunities.
The advantage of this type of passive earning is that there is no cost, because one’s knowledge and skills are endless, and can continue to produce and bring in benefits, which is the so-called “knowledge monetization.”
Dropshipping is one of the easiest passive income generating streams The only expense you need to incur is to market your products, through various online platforms. The most important aspect of dropshipping is to choose the right products and to find a suitable platform to reach the potential consumer. The drop shipper takes the products from the original supplier to sell to the customers on their platform without maintaining any huge bulk of stocks.
E-books using viral marketing to automatically sell eBooks on the Internet is the simplest source of a passive income! It is worth mentioning that the front-end must provide free value.
Now you don’t need to go through the publisher to make a book, you can make an eBook with a simple PDF file. Then you can monetize it on platforms like Amazon, Kindle, Google Play, etc. If you are a blogger, you can turn your most popular content into e-books for sale, which not only saves time but also makes money in lump-sum.
Can You Achieve Financial Freedom With Passive Income?
Financial freedom is an equation, requiring passive income to be greater than our daily expenses. That is to say, our passive income must be high enough, not to say that we are rich, but to be financially free. If you just have money but no passive income, it is not financial freedom.
Earning enough passive earning sources, to cover all your daily expenses, and to save for the future can’t grant you a state of financial freedom.
So with investment funds, is financial freedom possible? The answer is yes. However, certain conditions need to be met. The premise is that your principal is sufficient, and your investment yield is sufficiently high to make your passive income source a stable one.
Also Read: Top 10 easy ways to earn money online
Passive income is not Easy Money, it requires continuous learning and hard work to get. With the above methods, you can choose what you want to do the most and then start a more in-depth study. As long as we master certain methods and insist on long-term investment, there is a high probability that we can make money. Many people cannot make money with passive income, because they are too anxious and always want the process to be quick. But building a source of passive income requires time, patience, and research, and then the gains can be achieved for a lifetime.
Frequently Asked Questions:
How Much Should I Invest According To My Income?
There is a more classic saying in the financial industry: the 4321 rule. That is, 40% of the family’s monthly income is for investment, 30% for living, 20% for savings, and 10% for insurance. Although many financial advisors have their different opinion, in general, your investments should not be higher than 40% of your income. These financial plannings allow you to have a good idea of your family assets, spend a targeted amount, and invest reasonably and reasonably. When you develop the habit of doing good financial planning, you will not feel that it is a cumbersome thing but will become an indispensable part of your life.
How Much Of Your Time Will Be Invested In Earning Passive Incomes?
Different types of passive income streams take different time variations to generate profit. For example, if you are planning to use your blog to earn passive income, then yes it will take time to build traffic to your blog, and for that regular articles should be posted on your blogs to create content traffic. But if you are using freelancing platforms to generate passive income, then as soon as you provide services you will get paid.
What Are Different Ways To Invest Money To Create Passive Earning Sources?
There are various types of investment options such as stocks, funds, gold, etc. As for what method to use, you can choose different investment methods according to your age and risk preference. Generally, according to risk preference, investors can into three types: conservative, slightly conservative, and neutral. Young and proactive investors can choose to invest in all stocks. The neutral type can choose to buy funds. Slightly conservative can choose different types of funds. Conservative investors can choose wealth management products like fixed deposits with fixed returns.
How To Make Your Financial Plan To Achieve Financial Freedom?
Creating a personal financial plan is important to achieve your goals. One can make their financial plans by doing a SWOT analysis of their current financial situation. SWOT analysis includes strengths of active and passive income. The weaknesses of a financial plan are debts and loans. Opportunities of a financial plan could be chances to invest and monetize your skills, in your free time. And threats of the financial plan could be creating funds for emergencies, uncertain expenses, and retirement.