Background Image: http://bodyonept.com/
To be honest, I only heard of the term, "passive income," a couple of years ago when I first started learning about money. Blame that on being raised by parents who believe money should not be publicly discussed and never receiving even a day of financial education at school!
But wait, doesn't my background sound familiar? Because if you're also a Filipino from a middle-class background and also got "traditional" education, you can probably relate. Right? Let's not fret, though, especially now that we understand how important financial education is!
So what's passive income?
This is basically a source of income that you don't have to consistently work hard for. In other words, this is income you get even when you're not doing anything.
Sounds great, right? Imagine not having to worry about your electricity bill because you know a source of passive income takes care of it. Work smarter, not harder, as they say!
Image: http://www.partnerswithvision.com
It's not surprising to know that if you want to achieve a level of financial independence, what you need to establish is passive income.
How Different is it from Windfall?
Windfall is money you didn't expect. For example, it could be from an inheritance or a donation or a tax return. Both are not immediate products of working. The difference between a windfall and passive income, however, is that the latter comes regularly.
In other words, it's almost like a salary that you get without lifting a finger. However, unless you have millions in your account that you can freely use to invest, please take note that passive income usually doesn't come right away. It arrives after years of work and investment (remember delayed gratification?).
Common Sources of Passive Income
I have come across different sources of passive income that we can try, and because we have different personalities, we may find that some options work better for us than the others. Here they are:
Image: http://romanknox.com
1. Real Estate
If my parents ever taught me anything about money, that would be in the guise of their passions: real estate and jewelry. But let's just focus on the former since I have no piece of jewelry at all that I bought myself. Haha!
Anyway, according to most books I've read, while a primary residence is a necessary investment, it doesn't earn money. This means you need to invest in properties that are income-generating. Examples are boarding houses, houses for lease, rental buildings, and commercial spaces.
(Shameless plug: www.davaorealproperties.com)
2. Stock Market
This is where you should invest if you have 1) little seed money, 2) time and willingness to earn, 3) time and willingness to risk. Basically, you invest your money (as low as P5000), buy stocks from the biggest companies, continue buying regularly, and let your money grow for around 10-15 years.
3. Mutual Funds/UITF
This follows virtually the same principle as investing in stocks. What's the difference? Unlike in stocks, if you lack time and willingness to learn and take a risk, you need to get someone to do the dirty job for you. This is where organizations that offer mutual funds and banks that offer unit investment trust funds (UITF) come in. Choose a reputable institution or bank, invest your money (regularly), and let the fund manager do his job.
Image: http://momentumni.com
4. Business
Not all businesses give us passive income. Some are just glorified jobs where our boss from the office becomes the customer. Not that there's anything wrong with this!
However, for this to be considered as a source of passive income, the business should be able to operate with or without you. This is where delegation comes in. Hire driven people to run your business for you. Without usurping you of course.
5. Networking?
Unlike the four options above, you can immediately start earning through networking. Okay, I have zero experience with this, but there was one time when I opened an account with a networking group. That cost me around 3k I guess? I was never able to use it.
I believe their income is legit, but my reason for not networking is personal. So yes, I don't deny that I have something against networkers I have met. You see, I don't like the impression they're making that they're able to buy all the latest gadgets and sports cars with their "passive" income. Come on, what a way to teach your people pagwawaldas! (The English term, "wasting," is not so strong.) And what a great way to inspire people - - through envy!
My opinion is this: If your passion is to help people earn, you might as well teach them the right way to use their money. It's called social responsibility.
But if you are into networking, earning decent money from it, and don't have to climb the social ladder (you know what I mean), that's great!
However, if you're like me who also have strong opinions against the stupid use of money and keeping up with the Joneses, I think it's better that we stick to the first four sources of passive income: where the passive income we generate comes after years of hard work and wise investment.
So what about you? What are your thoughts on passive income?
_________________________________________________________________
Do you like this post? Never miss out again when you click on the cute bunny below:
Or by entering your email here:
