WHAT IS PASSIVE INCOME?
Passive income is any income you earn in a way with little or no daily effort. Something that earns you money without a 9-5 job is considered passive income. This includes income from a rental property, dividends, royalties, etc. These could take effort and time to build. But once in place, they could earn you income without additional effort.
REASONS FOR BUILDING PASSIVE INCOME
For anyone dreaming about quitting their job to follow their passion or retiring early, passive income is required to pay bills. In his book “Rich Dad Poor Dad” Robert Kiyosaki suggests that building passive income through assets is important instead of spending money on liabilities like cars, phones, etc. You need to use your current income to build the required assets to add more cash flow to your income. This could compound (hard-earned money put to work to make more money). This nest egg could be a backup when you lose your daily job.
BENEFITS
1. EXTRA INCOME OR CASH FLOW
Everyone loves earning extra money on top of their 9-5 job. You could use that income to fund your expenses or emergency fund.
2. INVEST
You could invest that extra money to reach your financial goals. That extra income could be invested to earn some more money.
3. ACHIEVE FINANCIAL INDEPENDENCE
Millennials are trying to achieve financial independence. We will elaborate on how you can earn passive income in many ways.
WAYS TO CREATE PASSIVE INCOME
1. INVESTING IN DIVIDEND STOCKS
Dividend stocks are one of the very effective ways to earn passive income. Initially, you might have to study which dividend stocks are safe. You must invest plenty of money to earn a large dividend check. One way to achieve a large residual income over time is to invest regularly. Nowadays, many brokerages offer 0% commission/fees to invest. You can use Robinhood, M1 Finance, Fidelity, etc. These brokerages could be used for building your portfolio. You can set up recurring investments daily or weekly, depending on your investing style. For example, consider you built a $1 million portfolio with dividend stocks that earn a 4% dividend yield; it sums up to $40,000 per year.
2. REAL ESTATE OR RENTAL PROPERTIES
You can save enough money to buy a rental property that earns you a monthly rental income. You can buy a single-family apartment/house or a commercial real estate property. A cash-flowing property is a good way to bring in some monthly income. You can invest in Real Estate ETFs or REITs (Real Estate Investment Trusts) to diversify across various property sectors. You can also house hack – rent out the extra rooms in your apartment to achieve monthly passive income. You can buy real estate near you to check on the property or look after it. There are also a lot of property agents who manage for a monthly fee. That route has also proven to be helpful for a lot of people.
3. DIGITAL PRODUCTS
If you have the creativity to create content/products that others could use, you can monetize it. It could be an e-book, a podcast, or an application that people can purchase. This could provide passive income for a long time. Many book authors and application owners earn passive income in this way.
4. HIGH-YIELD SAVINGS ACCOUNTS
You can put your money to work using a High-Yield Savings Account instead of sitting in the checking account. According to the current market, these High Yield Savings Accounts earn 4 to 6% interest.
5. INVEST AS A SILENT PARTNER
You can invest and act like a silent partner in a business where the profit can be split on a percentage basis according to your investment. You can lend money to small businesses through small bonds with a timeframe to pay you back.
6. LAUNDROMAT, CAR WASH, OR VENDING MACHINES
These are a few examples of small-scale businesses that can generate passive income for you. You can hire a manager and employees/contractors to take care of all the required work and collect the revenue generated from it. Many people consider these options as they can be passive or semi-passive income.
7. CASHBACK REWARDS OR CASHBACK SITES
Cashback cards are another way for people who pay their expenses/purchases using credit cards to make extra money. Cashback websites like Rakuten offer various cashback options based on the company/brand. The cashback rewards can go as high as 50-60%, depending on the store and the item they offer. Rakuten sends the cash rewards as a check to your house, which can be deposited into your bank account.
8. AFFILIATE MARKETING
This is another practice of partnering with any company, promoting their product(s), and receiving a commission for a user purchase through your referral link. Many blogs, websites, and YouTube channels generate income in this way. This can take a while to monetize as you need to build an audience.
It is now time to get started on building your passive income streams. It is going to take substantial time and effort to build passive income. You can pick an idea from the above, plan it out, and dedicate your time and money to building those income streams until you achieve your goals.
Building a passive income that requires no work is a MYTH. It will consume resources like time, effort, money, etc., in the beginning. It is time to TAKE ACTION.
