Passive income has to be one of the most delightful ways to make money. Passive income is money which flows in regular intervals without the need for putting in a considerable amount of effort to create it.
The reason why passive income is appealing is that it requires little effort to make money. This is what is often referred to as making your money work for you. Generally, you invest your money in a product that will generate an income.
But beware, passive income is taxable. However, don’t let the tax deter you from creating a passive income. Passive income is taxed differently than active income, but it is still taxable so be knowledgeable before investing.
What is passive income?
The goal of passive income is to earn money while you sleep. This is how to get your assets working for you. You invest time in building something upfront that will generate income down the road with little effort on your part.
Building a business that requires time upfront but allows you to work less as the business gets going is a great way to generate passive income.
Investing in financial products that produce dividend income or interest income and appreciate in value over time is ideal.
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Passive income for beginners
There are many ways a beginner can start investing and making money. As Warren Buffet is known to say, “If you don’t find a way to make money while you sleep, you will work until you die.”
Often when people need more money they turn to a part time job or side hustle. The better option would be to stop trading time for money and create passive income.
Types of passive income for you to generate money with:
1. Bonds and GICs
A common method for passive income is investing in financial instruments such as bonds or GICs. The financial instrument protects your initial investment and offers interest payments in exchange for you lending them money. They are a safe investment, but the drawback is they offer lower interest payments.
2. Investing in the stock market
There’s more risk in investing in the stock market as there are no guarantees, but the idea is to purchase shares in exchange for those shares to appreciate in value. The good shares will offer dividend payments as well.
3. Rental property
Investing in rental property can be passive if you hire someone to do the maintenance and repairs in the building. Ideally the building you invest in will appreciate over time and you will be earning 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 another’s product or service. Many bloggers and podcasters use affiliate marketing to add to their income streams. There is no work involved on your end when you sell other peoples products.
6. Selling your own digital products
Creating an educational product to sell to others, creating membership sites and creating templates or tools to sell to others are a great way to make passive income. The work goes in at the start to create the product, but once that product is created, there is very little to do. Just watch your product sell.
7. Fractional investing
Tech companies are disrupting the traditional methods of investing and allow people to invest in fractions which is more affordable. Real estate and stocks are crowdsourced and this makes investing more affordable.
The bottom line is getting your money to work for you is a smart way to earn money. It frees up your time pursuing active income and it’s an excellent way to protect the value of your money. Ideally you are investing your money in appreciable assets that offer passive income as well.