What Passive Income Is About?
Variety of incomes has categorized as below:
- Dividend / Portfolio Income
- Property Income (Can be passive and active)
- Royalty Income (Work first, reap later)
Let me explain to you in very layman terms. What we work in office or a place daily, the job needs your presence, your physical appearance, your time, your energy and you are getting paid for a fixed income monthly or a job by job basis paycheck, in the form of wages, tips, salaries or commissions, that’s the active income.
For example, a doctor conducting a surgery procedure, he needs to be there to perform the surgical process, an aquarium keeper like the image attached above, working on your passionate job, feeding the sea life, even walking the dog for your neighbor and receiving a token of appreciation, all are considered active income.
What Passive Income Is About? Passive income is the income that you receive from a source that you receive on a regular basis, and it requires very minimal to no time and effort spent to maintain the income source.
Many friends around me have not yet discovered the power of having passive incomes. Whenever we encounter these two words, many people have no idea what does that even means, and have no idea how powerful it is, to be able to save us to reclaim our freedom back. When I said freedom, it simply means our rights to do the things we like, with the people we want, at the timings that we like, still can make money even WHEN WE ARE SLEEPING.
Your money is out there, somewhere working for you, to generates more than you invested, without your physical body to be there, hard-selling, 24/7, your money does not rest, it automatically generates more income for life. The more good income ideas you have, the more passive money you can make.
If you google it, more explanations as below:
Wikipedia – “Passive income is generally defined as a stream of income earned with little effort, and it is referred to as progressive passive income when there is little effort needed from the individual receiving the passive income in order to grow the stream of income.”
Investopedia – “Passive income is earnings derived from a rental property, limited partnership or other enterprise in which a person is not actively involved, etc.”
Make sure EVERYTHING you do to your money, it is able to beat the annual economy inflation rate.
In order to make your money worth placing and grow, make sure the growth of our investment will at least beat the economy inflation.
The facts I got from google:
“The annual inflation rate for the United States is 1.6% for the 12 months ended June 2019, compared to 1.8% previously, as published on July 11, 2019, by the U.S. Labor Department.”
“Singapore’s annual inflation rate edged up unexpectedly to a two year-high of 0.9 percent in May 2019, from 0.7 percent in the previous month and above market expectations of 0.7 percent.”
These are the things you can do to beat the annual economy inflation rate:
1. Dividend Income / Portfolio Income
Portfolio income coming from various types of investments, for instance investing in the stock market, mutual funds, government bonds, exchange-traded funds, and perhaps annuities. The form of return on the investment would be in terms of interest gain, dividends, and capital gains.
a. Buy in good company stocks/dividend stocks
Placing money in profitable company shares, or businesses and receive the dividend later when the companies are making revenues. If buying shares and wait for it to grow or fall is too risky for you, I suggest to have a long term investment mindset by investing in dividend stocks. We can spend more time, looking into the company’s financial health, the past 10 years of earnings per share, what is the debt of the company, does the net income and liability ratio gap is not too far off. This homework might sound tedious, but once we found the gems, we keep the gems for the annual dividend and see it grow. When the company is making money, they can pay you the dividend that able to beat the year inflation rate. Your money will not shrink by saving them in the bank.
b. Government Retirement fund 4-8% return (slow but safe), save as fixed deposit in a bank (bargain for a high-interest rate)
After all, if you are too lazy to find ways to make money works for you, you have no cash to buy a house, no property, not interested to study good companies, and you just want to work for employers. You can also consider top up the retirement fund that contribute by yourself and employer monthly, to the government retirement scheme account. Check out how many accounts are there, and load inconsistent money to the account that able to generate a higher rate of interest. From there your money will grow faster, and work harder for your retirement.
Besides, some banks are able to offer a good return interest rate with a huge amount of fixed deposit savings. You can also bargain with them for a better rate, as long as the money is not depreciating and able to beat the inflation rate.
c. Invest in good businesses
This idea sounds like we have to fork out a big chunk of money, fortunately, I did once, it only cost me USD5K. Once I join an Options trading class, and the teacher introduces us to this business guy. He told us about his way of making money. He suggested having a pool of people, maximum 20 paxes, we approach a profitable Thai food restaurant in Singapore, we put in funds that we can afford, from $5 – 20K each, to joint venture with the company, so that the restaurant is able to have more fund to branch out, to open more stalls elsewhere. Last year we are able to make 10% of what we invested. This isn’t a bad idea at all right? As long as we do our homework to analyze the business.
2. Property Income
Property income means we bought a property to make money through renting, leasing as residential, offices, commercial services. Renting can be long term or short term like homestay for travelers. We can also make money from the property appreciation value, the longer we can hold they more appreciation it will be.
a. Rental Income
Rental income can be in the form of property or equipment. For example camera, drones, photo shooting equipment, studios, vehicles and so on. Property wise, we can rent out our place for long term rental or periodical homestay. Some of us might have our parent’s house that completed the repayment to the bank loan, then we can make money by renting a room for travelers to stay for a night or two. You can make friends, be a host, and they get to share the experience of a different culture.
If you have a house, and you don’t need to stay now, just rent it out. The rental can help you to pay the bank loan if is not 100%, at least half so that the rental will reduce our monthly payment to the bank. Bear in mind that, you will need to pay up too for the furniture, perhaps some light renovation beforehand. Making your place a little nicer, more comfortable, and you can rent it out for a better price.
3. Royalties Income
Royalty income is like license fees, patent fees, from your copyrighted work, franchises. For example, the music you compose being purchase to be played for commercial purposes. The person who uses it will have to pay you a royalty fee that bind by an agreement. Book what you wrote, you can publish onto Amazon, whenever a sales, Amazon will pay you royalty fee. Taking photos as an amateur or photographer, you don’t have to be one actually, I am not, but I am making some coffee money here. Uploading images and videos to sell online at these platforms Shutterstock, Getty images, iStocks.
Take photos, videos, or create graphics, value contents upload to the internet, for others to purchase for their own usage. You can make a living by simply interested to take photos and videos by only having a good mobile camera. I’m not kidding! I have easily sold up to 50 images taking from my iPhone. Of course, there are certain criteria that we need to follow before we upload our images and videos, we just have to make sure the image quality is high enough, give some relevant titles and descriptions, and that’s it. Your photos are being placed in the stock website as long as you live, and the online market works 24/7, your assets are up there selling to the world, Yes, even when we are sleeping.
Active Income – A day job, part-time job, physical involve pay wages job that needs your precious time
Passive Income – Doesn’t NEED you to be there physically, income-generating 24/7
- Dividend / Portfolio Income – Stock Market is not DANGEROUS
- Property Income (Can be passive and active) – It depends on long term or short term renting
- Royalty Income (Work first, reap later) – If you can write, compose, create contents, draw, take photos, don’t waste the opportunities to make money.
Cool? Please feel free to leave me some questions and comments below, I would be more than happy to help to clear your doubts! Cheerios!