How would we like our ideal future to look like? A relaxed, laidback lifestyle with family and no tension about the income. Sounds fabulous and too good to be true. It is possible if we can plan our life, centred on financial freedom.
“The key to financial freedom and great wealth is a person’s ability or skill to convert earned income into passive income or Portfolio Income”-Robert Kiyosaki. This speaks convincingly about the power of passive income in our life.
Many people dream of a cosy, stress free life where they can just enjoy and explore life and see themselves soaking in the abundance that life has to offer. But what about the financial aspects? Why worry? Passive Income is the solution for this! The path to passive income is not smooth. Agreed… but it is not tough either. The thought of having ample family time, enjoying the pleasures of travelling and other opportunities is unquestionably invigorating and delightful! Harnessing the amazing power of this passive income is a great way to enjoy a lavish lifestyle and peaceful life.
What is Passive Income?
Passive income is the money that is earned regularly without being actively involved in it. We may have to invest a little time, efforts and energy in it during the initial stages but later this income generates itself. The difference between active and passive income is that the active income requires constant input of time to generate income but passive income does not. This is the only income that sets you free from the rat race and which works for you whether you constantly work or not. As long as we can ensure our passive income outpaces our monthly expenses, we have the freedom of spending as you choose. This reduces our stress, anxiety and fear of failure. The anxiety of paying the next bill, and other ‘what if’ scenarios. Passive income helps to alleviate these worries.
The pros and cons of passive income:
- Generating passive income provides many benefits: We can make money without using too much time. The key is to find the right balance for our existing lifestyle, so that we can make profit without too much being spent. Besides being a steady source of income, it gives also gives us the comfort of having a flexible schedule by not requiring us to work for the particular timings every day.
- Financial freedom: Passive income helps in reducing financial stress and lets us focus on other important things in life.
- Good retirement plan: This is a wonderful avenue to help us save more money every month. The retirement journey would be smoother, with passive income by our side
- Opportunity for generating more passive income: Establishing one stream of income will enable us to think about one more source of passive income.
- Success unlimited: Unlike traditional jobs, there is no limit for the amount of money that we can gain from passive income.
- Low Income at the beginning: This is one of the disadvantages of passive income as it takes a while for the income to grow and it requires patience. This type of income has exponential growth and the benefits of waiting will outweigh the negative aspect of having a small income at the beginning.
- Risky at times: Success is a part of this avenue but there are also possibilities of risks being involved, and so the steady income from this source is not guaranteed in some cases.
Creating the Passive Income:There are many avenues for passive income. Let us try to understand them.
- Real Estate income: This is one of popular ways of generating passive income and occupies a significant place in this income domain. This can be achieved by investing in turnkey rental properties that are ready to be rented out.
- Business Income: There are numerous businesses which can be turned into a passive income. There are many possibilities-
- Creating a blog: writing is one of greatest talents and launching our own blogs can generate income eventually.
- E-commerce: Selling products online can be a good source of income- commerce sites have made it easier to make money by selling online
- Certificates of Deposits: This is advantageous, as there are no income or net worth minimums to invest. It gives protection to the hard earned capital. With good interest rates, this can be a good source of passive income.
Passive income through stock market:
- Dividend stocks: This happens to be one of easiest ways of passive income because the investors get paid to own them. Part of the earnings of the company are distributed among the investors as dividend. This money can be reinvested to purchase additional shares.
- Index Funds:They are mutual funds tied to a particular market index. These are not designed to beat the market. The index funds are passively managed and the securities included in them don’t change unless the composition of the index changes. They are known to perform better than the actively managed funds in the long term
- Investing in Bonds: They are a great source of passive income as here the investors earn money from the activities of another entity. This stream sometimes pays a greater return than other sources.
Does this avenue of generating sound interesting to you?
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