What is passive income?
You may have heard the term passive income before and asked yourself, "Could I actually do this?"
You are now aware that you are alive Rich life is It's not just about making enough money to last until next Friday. In fact, you need to start thinking bigger and longer term. While this could mean ask for a promotion It could also mean (hopefully with a raise) finding additional or alternative ways to make money.
What is passive income?
Passive income is money that you make and that you hardly have to exert or exert at all. Make money while you sleep? Yes, this is passive income.
When you receive rental money from tenants or license checks from a Hollywood studio, you are receiving passive income.
Why should you build passive income
Why wouldn't anyone want extra income – it's money. Moron.
However, finding a way to build passive income takes creativity, patience, and even a little bit of luck. Earning passive income not only gives you extra financial cushion by isolating you from the ups and downs of your day job, it also helps you build your resilience. It makes you stronger. It prepares you for the future, for the unknown.
Passive income helps you live your rich life.
Can You Get Rich On Passive Income?
Generally no. Like the Aesop fable of the turtle and the hare, however, slowly but stubbornly wins the race. In the long term or regularly, stable income streams can build up over the long term.
For example, an additional $ 300 per month becomes $ 3,600 per year, which becomes $ 18,000 or more over 5 years when the money is placed in an interest-bearing savings or investment account. Not bad for passive income.
Types of passive income
Ramit offers 8 different ways to invest in real estate and many of them certainly fall under the passive income category. Let's look at two of them.
Buying a rental property and collecting monthly rent from tenants is often seen as the classic definition of passive income. Even if you don't buy the property directly for cash and instead take out a mortgage, the monthly rental income should cover the mortgage, taxes, insurance, HOA, repairs, and other fees – any leftover money will serve as passive income.
This, of course, is not passive income – there is still some work to be done. Unless you hire a manager or management company to oversee the property – – This of course leads to additional fees and reduces potential revenue – – You will be the one your tenants call when the water heater breaks (or worse).
Real Estate Investment Trust (REIT)
If becoming a landlord isn't your thing, there is an easier strategy to reap the benefits of owning a property – – Owning shares in a Real Estate Investment Trust (REIT).
A REIT is a company that owns a portfolio of commercial real estate, including office buildings, retail space, apartments, and hotels. Stocks of publicly traded REITs can be bought through a regular brokerage account, and you can take advantage of the real estate market without the headache of a landlord. You can rely on the investment expertise of the REIT portfolio manager when selecting the assets in the portfolio. If the REIT does well, you passively earn.
Most people don't consider investing passive income, but physically it does (to be clear, income from investments is classified as portfolio income according to the Internal Revenue Service).
To save millions for the future, Ramit recommends starting your investment early, including maximizing contributions to your company's 401,000 and establishing a Roth IRA or other retirement plan. It's also never too early to reach out to a financial advisor for help setting up these accounts.
While your investment income is most likely to stay in your accounts and reinvested (you won't be paying them out regularly to spend on things like vacations or an online degree), you can rest assured that it is still income growing calmly and safely – and passive.
The "social internet"
There are tons of ways to use social media websites to passively generate income.
And no, you don't have to become an Instagram influencer promoting a fake music festival in the Bahamas.
Ramit offers ways to use YouTube, Instagram, and even good old blogging to make some extra cash. Whether it's selling products or services, your expertise, affiliate marketing or ads, social networks, and online marketplaces are well aware that ordinary people like you are using them to make a little extra money on the side deserve, and that's perfectly fine.
So … is passive income really passive?
Be careful not to take the word passive too literally. You still have to work a little to make this money.
As Ramit pointed out last year regarding the truth about passive income:
1. Passive income is absolutely possible.
2. However, it requires a lot of effort.
3. It can give you incredible freedom and flexibility.
4. Too many people pursue passive income opportunities without understanding why they even want to.
5. Decide whether you want to stay small or grow up.
Ramit admits: "I think it's great to be able to make money without doing a job, but I know that there really is no such thing. "
So does this mean that you have to give up all hopes and dreams in order to create a passive stream of income? No. It just means that you need to decide how much time you want to put into a sideline – hey, it could become your sideline – to generate income, and whether the benefits outweigh those efforts and risks.
Are you still thinking about options to generate passive income? Ramit has no shortage of online business ideas and opportunities to start investing online.
Remember, pursuing a passive income side project should still give you flexibility and freedom. If it makes a little bit of money, but you lose sleep and get left behind with other life commitments, then it is not passive income at all.
Trial and error are perfectly fine and you are not a loser if it doesn't go quickly. Just as passive income can grow steadily, so can your passion. You will be on your way to live your rich life.
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