Passive Income: How to Earn While You're Sleeping

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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!

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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

Finance Friday: The Secret Key to Wealth

So I guess many of us have already heard of the famous Marshmallow Test.

You know, the study conducted by Stanford University in the 1960s on 600 4-year old children. A child was given a marshmallow and was told that if she doesn't eat it right away, she'll have another one later.

Basically, the two options were these: one now or two later?

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It sounds like a no-brainer, but to 4-year olds, that's tough. I mean, who wants to wait? But only 30% passed the test. Later in life, the researchers also discovered that this 30% are the more successful of the group. Interesting, right?

So what's the point I'm driving? Simple. The secret key to wealth is more than self-control; it's more than sheer will-power. The secret to wealth is this:

Finance Friday: The Social Climber

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The social climber, for me, is someone who "needs" to have the latest and the current best. She feels the "need" to upgrade her lifestyle to keep up with what's new. Thus, while she earns more, she also spends more and saves less, a decision that only she and her family will suffer.

If you're looking for a blog post that badmouths a certain social climber (or, well, gold-digger), I'm sorry; you're in the wrong place.

It's not that I don't write about gossip (which is somehow true).

It's because the social climber can be easily you. And me.

Now that I have your attention (I hope), come to think of it. Since you started earning money, how many times you have received a raise? From that answer, how many times have you upgraded your lifestyle? Once? Twice? Each time your income increased?

Because let's face it:

Social-climbing is dangerously easy.

I'm confident to ask you these questions because I am on the same ground. Just recently, I realized that on good months, I am now earning almost 50% more of what I used to earn last year. As a freelancer, I technically don't receive a raise. However, as Yuri becomes more independent from me, I am also able to do more work in a day. Hence, more income.

And I'm not complaining at all! I'm praising God for this increase in His provision! The problem is that there is no increase in my savings. On the contrary, there is a big increase in my spending.