Passive income and why you need to know it
Passive income has to be one of the most enjoyable ways to make money. Passive income is money that flows at regular intervals without the need to exert considerable effort to create it.
The reason passive income is attractive is that it requires little effort to make money. This is often referred to as making your money work for you. Usually, you invest your money in a product that will generate income.
But beware, passive income is taxable. However, don’t let taxes stop you from creating passive income. Passive income is taxed differently from active income, but it’s still taxable, so do your research before investing.
What is passive income?
The goal of passive income is to earn money while you sleep. Here’s how to make your assets work for you. You invest time in building something up front that will generate income down the road with little effort on your part.
Starting a business that takes time to start but allows you to work less as the business starts up is a great way to generate passive income.
It is ideal to invest in financial products that produce dividend or interest income and whose value appreciates over time.
Passive income for beginners
There are many ways for a beginner to start investing and making money. As Warren Buffet says, âIf you can’t find a way to make money while you sleep, you will be working until you die.
Often, when people need more money, they turn to part-time work or a side job. The best option would be to stop trading time for money and create passive income.
Types of passive income to generate money with:
1. Bonds and GICs
A common method of passive income is to invest in financial instruments such as bonds or GICs. The financial instrument protects your initial investment and offers interest payments in exchange for your loan of money. They are a safe investment, but the downside is that they offer lower interest payments.
2. Invest in the stock market
There are more risks in investing in the stock market because there is no guarantee, but the idea is to buy stocks in exchange for the value of those stocks. Good stocks will also offer dividend payouts.
3. Rental property
Investing in rental property can be passive if you hire someone to do the maintenance and repairs to the building. Ideally, the building you invest in will appreciate over time and you will earn rental income each month.
A royalty is a legally binding payment made for the use of assets such as copyrighted works (books, music), franchises, and natural resources.
5. Affiliate Marketing
This is when you earn a commission for selling someone else’s product or service. Many bloggers and podcasters use affiliate marketing to increase their income stream. There is no work involved on your end when you are selling other peoples products.
6. Sell your own digital products
Creating an educational product to sell to others, building membership sites, and creating templates or tools to sell to others is a great way to generate passive income. The work begins at the beginning to create the product, but once that product is created there is very little that needs to be done. Just watch your product sell.
7. Fractional investment
Tech companies are disrupting traditional ways of investing and allowing people to invest in more affordable fractions. Real estate and stocks are outsourced, making investment more affordable.
The bottom line is making your money work for you is a smart way to make money. This frees up your time looking for active income and is a great way to protect the value of your money. Ideally, you invest your money in sizable assets that also offer passive income.