“If you don’t find a way to make money while you sleep, you will work until you die.” — Warren Buffett
Time is our most valuable resource, which is why we should focus on using it more wisely. Unlike money, we can’t get back time once it’s gone.
Money is an absolute necessity. We need it to survive in this world we live in. The food we eat, clothing, education, and basically our whole lifestyle depends on money.
We work hard and sweat in our jobs to earn the required money. But while doing so, we get so carried away in the process that we put things like our hobbies, passion, family at the back of our mind. And aren’t these things the very reason we were working so hard for, in the first place?
Why do you need PASSIVE INCOME?
After witnessing economic downfall all around the globe in this pandemic, it’s even important to realize that having a second source of income could provide a financial cushion to fall on in times like these. Learning about passive income can completely change the way you are living right now. Think about it, if you could put in some work into something that would generate money for you in the years to come, would you say no to that?
Passive income is going to prove very beneficial if you are willing to put in the early efforts. This is going to be the best investment you can make for your future.
Now that you know the need for passive income, let’s understand the 7 different types of income.
Types of income
*Earned Income (active income)
*Capital Gains Income
Also known as active income is the primary source of income for most people. Remember job stands for, Just Over Broke. This type of income is where you provide a service for a fixed income. The majority of us earn using this type of income and not many go any further.
In this type, you sell a product or service for more than it costs and earn a profit from it. This is when you become a self-employed entrepreneur.
For example, you sell items on eBay.
This is when you have leftover cash that you are not using. You could invest your money to make more money. Maybe you can invest in a new business, a savings scheme, and let the magic of compound interest do the rest.
You can become part-owner of a company by buying shares of that company. This paves the way for you to earn dividend payments. Well researched investments can generate excellent and hefty passive income.
This type of income is when you generate income from renting out something you own. This is also an excellent way to protect money but if you want money quickly, this is not for you. This type of income stream requires a substantial amount of investment to be made initially.
6.Capital Gains Income
Buying and selling of assets can provide you with this type of income. For example, if you buy and sell stocks and shares. In this type of income, it is better to consult a professional accountant as there are different sets of rules for different assets in different countries.
This is a passive income generated by creating something unique and charging people for it.
Mobile Apps are the best example that we can think of. You can also create an online course.
“Many people think that passive income is just about getting something for nothing.” But you may have to do some or all of the work beforehand, as passive income often involves some additional work. You may even need to keep your product updated or your rental property well-maintained, in order to keep the money flowing.
But if you are committed to this strategy of trying multiple sources of income, it’s a great way to generate money and create that financial cushion that we spoke about, if you ever need to lay back for a while and focus on your passion and hobbies.
Tips to reduce tax when having multiple income streams
These are great strategies for generating additional income, but you’ll also be generating a lot of tax liability. However, you can reduce this tax liability by setting up yourself as a legitimate business and creating a retirement account. This strategy may not work for all of these passive sources of income and you may need to think of other viable ways to reduce and minimize the tax liability.
Passive income can be a great way to help you generate that extra cash flow. With the pandemic closing down businesses, passive income can help you bridge the gap – if you suddenly become unemployed or even if you voluntarily want to take a time out.
Few special mentions
- Writing and self-publishing ebooks on a platform like Amazon Kindle Direct Publishing.
- Uploading photos you take from your phone or camera to a stock photography website.
- Using mobile apps to get paid. Apps like Sweatcoin which pay you for walking or running.
- Creating content on an online platform, sign up as a freelance content writer. write for us!!!
- Affiliate marketing is the process of earning a commission by promoting other people’s products.
What if you could have a secondary source of income that didn’t require any active involvement? For most people, the concept of passive income is a mystery. For the rich, it’s the way of life. In simple words, passive income is the money earned through investment or work done beforehand that requires little to no active work or involvement at present to generate revenue.
It’s very important to realize that time is such a valuable and limited resource. You see, continuing to work for the rest of your life is not the answer to earn more money because it’s simply not sustainable. Trading your time for income can’t get you the life you want.
There are many ways to earn a passive income. Of course, you’ll want to ensure that putting in effort into a new passive income stream isn’t causing you to lose focus on your current income stream/s. So, you do want to balance your efforts and make sure you’re choosing the best opportunities for your time.
However, creating a passive income stream is not a get rich quick scheme. It takes a lot of effort and initial investment with very little to no return in the beginning. It involves an overall sense of frustration but is a brilliant learning curve. It’s the best investment of your time that you could engage in.
Thanks for reading this article! Leave a comment below if you have any questions or suggestions.