If you’re only making money from the hours you clock in, you’re doing it wrong.
That’s not an insult. It’s the way that most of us were taught to understand money. You are paid for your work. Period. It is what propagates the 40-hour+ work week, second jobs and overtime. But it is also what keeps the rich getting richer while you struggle to save.
There’s another way to make money, a way that continues to accumulate income long after your work is over. It’s called passive income.
Maybe you’ve come across this term in passing but never utilized it. But passive income is not something to be shrugged off as an unreachable goal. Anyone can learn to acquire passive income, even you. The first step is understanding how it works.
Let’s break this down before going any further. Passive income, on a basic level, is really quite simple.
Passive income is essentially a stream of income that comes from an investment. This investment can be one of two things:
These types of investments require either your time and work, or your money. After that initial feat, passive income generally takes care of itself. Many people think of it as money you earn while you’re sleeping.
You may have various streams of passive income, in fact wealthy people have multiple. Tom Corely conducted a five year study of the habits of wealthy individuals and reported that 65% of participants had at least 3 streams of income. Out of that 65%, almost half had five or more streams of income.
But you don’t always have to be rich to get rich. Not all passive income requires a large financial investment. In contrast, many opportunities for passive income require work upfront that will end up paying off later.
Not everyone has streams of passive income, but the individuals that do are able to increase their wealth, save earlier and build a financial safety net for themselves.
Passive income is not a get rich quick scheme. An investment of money or work also means an investment of time. Not all forms of passive income pay off right away. However, if you put in the effort early, you’ll be able to sit back later.
One of the largest pay-offs of passive income is the chance to retire early. Having multiple streams of revenue will create a more stable financial situation. That means if you’re fired, or another pandemic hits, you will not be without income.
Because most passive income requires little to no daily effort after the initial investment is set up, it will also put you on the path to early retirement. Just ask Joe Udo, creator of the personal finance blog Retire by 40.
Udo has an entire section on his website dedicated to passive income. He cites it as a key factor to retire early and assured his readers that even COVID-19 didn’t affect his passive income much.
Everyone has the ability to generate passive income, if you are willing to invest money or time. To make this seem possible, we put together a list of passive income ideas that go beyond buying property. Take a look to see which revenue streams you see benefitting you in the future.
There are many more ways to make passive income but before you go on a research rampage, it’s important that you mentally prepare.
You will not make any progress pursuing passive income unless you get in the mindset that you can do it. That is the biggest hurdle after all.
No one wants to stress about their finances. However, if you don’t have a plan in place to manage your money, you will never be without worry. So before you hop on the passive income train, you have to be realistic about your expectations and your goals.
If you haven’t already, try creating a budget to figure out where your money is coming from and going to. Part of creating a budget is determining your financial goals. What are you saving for? What expenses do you need to take care of right away? As you gain control of these aspects of your spending, you can start to brainstorm additional streams of revenue to add to your income.
Once you’ve got a handle on your goals, make sure that you have realistic expectations for your passive income. Though some people market passive income as a way to make money without lifting a finger, the truth is that it takes hard work, time and sometimes large amounts of money to initiate the process.
Passive income doesn’t happen overnight. All of the options for this additional revenue are an investment. But, if you’re willing to make that investment, it will pay off in the future. And then keep paying off after that. And continue paying off forever.
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