Why One Should have a Passive Income

• 24 May 2018 | 1086 Views | By Mint2Save

The recent inflation and increasing necessities has increased our need to earn more. However, a regular 9-5 job can rarely provide you with the same. Cometh the Need,  idea hails aloud!! Yes, this need of generating extra income has been solved by passive income. A lot of entrepreneurs have focussed on the idea of making money as a passive mode. Now, we have students as well as experienced professionals working on the idea to generate passive income.

Before we dive into the intricacies of “Why one should have passive income?” we first need to understand the meaning of passive income.

What is Passive Income?

The layman definition of passive income is income that you earn without being actively involved towards earning it. In fact, regardless of the profession you are in, it’s important to know that there are two primary methods of generating income: actively and passively. “Active income” means when one is involved continuously in doing a meaningful amount of work in order to continue generating income. “Passive income” on the contrary means generation of a continuous stream of income after doing some upfront work, with very little effort or even with no work at all.

Why is it important?

There is an age-old saying that “time is money”. Time is our greatest asset, far more valuable than money. While money can be spent and earned, time can only be used up but just once. Active income, costs your time and effort. Passive income is especially powerful because it doesn’t eat up your time. Passive income makes money for you without much effort. If we talk about financial independence, then passive income is the best source to achieve it.

If someone is looking to build and accumulate wealth, or if they are looking to save up towards their retirement, or if one is simply looking for a way to relieve financial stress in their life, passive income is one of the best ways to do it. Passive income should definitely be used as a long-term strategy. Having lots of sources of passive income can help lower the financial risk, in case one source of passive income fails, one can rely on the other sources too. It provides a platform for financial stability and growth.

Some methods to create active income include most 9-to-5 jobs because as soon as you quit your job or you are fired from your job, you stop earning this income from your employer. Likewise, some of the methods to create passive income include uploading a video on YouTube, as once you upload a video to YouTube and set up ad monetization for it, there is nothing more you have to do, you can continue to collect the royalties from YouTube for plays of your video.

Passive income gives you the freedom of time. When one has freedom of time because they’re not involved in active-income work, they are free to do activities of their choice. One can pursue their hobbies or activities of their interest in this time. In short, passive income allows you to persuade activities that one would love to do rather than those activities that would pay one’s bills.  

Ways to earn passive income

There are many sources to generate passive income, some of these could be:

1. Investing in dividend yielding stocks: This is one of the most sort after and easy way to start earning passive income. You just need to do some research about the stocks of companies with a long history of paying dividends.  Most people tend to choose companies which show excellent financial results and have a good management team on the board. One should also look at the possibilities of diversifying the portfolio in order to reduce risk.
2. Investing in real estate: Real estate has been a principal investment for decades now, and for a reason that demand for it is always going to exist. There is generally an appreciation in the prices of real estate which makes it an attractive investment opportunity. More so, after investing in real estate, you can rent the property and get fixed monthly rentals from it.
3. Content writing: If you are good at writing on any subject and even want to pursue it as a hobby, this is a thing for you, courtesy: the internet. Some research on your target market and competition before following through it is required and you are done. This can also yield you returns on the basis of the articles you write.
4. Advertisement: If you already have a blog in place, or some other means of magnetizing traffic to your website, you can use advertising as a tool to generate a stream of income. As long as you get a few thousand visitors a month, even a single display advertisement could help you earn a lot. Even creating a YouTube video of any area that you like – music, tutorials, opinions, comedy, movie reviews – anything you want can help you earn revenue through advertisements. This works by attaching Google AdSense to your videos, which will overlay your videos with automatic ads. When viewers click on those ads, you will earn money from AdSense.
5. Peer to peer lending or other lending clubs: Lending Club or peer to peer lending would provide an opportunity to earn interest rates in excess of 10% per year – which is much more than what one can yield on general lendings with bank. But with higher returns comes higher risks as the risk of default is quite high in such lendings.
6. A high yielding savings account: Savings account, though not a very attractive option from the point of view of returns, but is a very safe option to generate passive income.
7. Creating a website: Creating a website is quite simplified these days. Using tools like WordPress, a website can be created easily and advertisements can be linked to it to earn income.
8. Becoming an affiliate marketer: An affiliate marketer is a person who associates himself with vendors directly, or on dedicated websites and promotes their products. You need to be able to draw customers to the company that you are affiliating for and in return, you can earn revenues from the company.

In short, passive income means freedom, freedom from financial worries and stress. While passive income might not be the answer to all of your abrupt problems, but it definitely is the route to success and most certainly the basic footing for wealth and happiness for people in lookout for alternative financial sources of income.