Wouldn't it be great if our bank accounts get credited with some income while we take a nap or spend time with our children? Income that you earn by spending some effort, time, and maintenance just in an ad hoc manner is passive income. It is the income you earn without investing time or effort on a daily basis. Individuals and businesses can earn passive income with some planning and initial work on setting it up.
It does involve a lot of hard work. You invest capital, time, and effort. It does not give appropriate returns in the beginning. But once it is set up and is successful, it will generate revenue and add to your wealth significantly.
Passive income is great for your personal finance -
- Money gets generated on its own while you focus on your career, business, or other important aspects of life.
- It is a good supplement to your active income sources.
- Passive income can support you in achieving your financial goals.
- It can be a fallback during tough economic conditions, job loss, unprofitable times in business, or unexpected expenditure.
- A properly set-up passive income strategy will help you earn income after retirement.
Here are some ways to earn passive income -
Rent from self-owned property
Investing in the right property requires research, effort, and money. Post that, you give the property for hire to get regular income in the form of rent. You can give homes, commercial property, clothes and cars on rent! The rent can help you pay off the EMIs on the asset.
Dividends from investments
Investments in shares, mutual funds and bonds provide income in the form of dividend and interest. An optimum portfolio cannot be developed overnight But once it is done, dividends and interest amounts get credited to you without you having to work on it frequently.
Royalty for creative work
If you are creative, you can write a book, create art and craft products, produce music or build a stock of photos. You can create blogs, podcasts or instagram accounts and monetize them. You can develop apps or IT products. Appealing work can generate income for many years to come in the form of royalties, usage rights, etc. But online assets and software programs require regular updates.
If you are expert in a niche area like baking, machine learning or yoga, you can curate online courses. You will invest time, effort and money in making them. But once they are online, you generate income in the form of fees regularly. You will need to respond to user queries and tweak/update the courses once in a while.
Invest in startups or lend money to new businesses
If you have money to invest and you understand business, you can invest in startups that you feel have potential to make it big. If they are successful, you will get handsome returns on your equity. If equity investing is too risky, you can lend money to businesses. You will earn interest periodically and your capital might be safer.