Many people may not know what passive wealth or passive income means, so here is a better explanation of this term.
Passive wealth or passive income refers to income that you are able to set aside to invest in business opportunities, use for a vacation, or even hold for retirement.
Passive wealth can come in many forms such as holding pieces of real estate and renting them to tenants, or even working on the internet as affiliate marketers.Whatever the case may be, you can rest assured that you do not have to depend on an ordinary job that can disappear tomorrow right in front of your face.
What is passive wealth or passive income?
Rental income or a business in which an individual does not actively participate.
Examples include book royalties and dividend-paying stocks.
Other financial and government institutions also recognize it as an income obtained as a result of capital growth or in relation to negative gearing. Passive income is usually taxable.
In short, passive income is an income received on a regular basis, with little effort required to maintain it.
The idea of building wealth through passive income has understandable appeal. This is particularly true, if you are worried about being able to save enough from your earnings to meet your retirement goals.
For example, suppose you want to generate $1,000 a month in retirement income from a portfolio. Then, you would have to amass about $250,000, assuming a 5 percent withdrawal rate.
In an uncertain economic country, having passive wealth is very important when it comes to having financial freedom.
If you have a horrible job, and you get paid by the hour, then learning about passive wealth should be on the top of your to do list.
If you are an introvert, and like to do things in your own way. Then, creating a passive income on the internet is the way to go.
You may have heard of affiliate marketing or even network marketing being talked about on the web.
These are two of the biggest passive income streams known on the web. However, the market is very competitive when it comes to affiliates promoting other people’s products online. Despite this, some marketers make well over six-figures online.
Having passive wealth means that it is income that lasts for long periods of time. Even years, if you are in the right business. Patience is important when it comes to obtaining passive wealth.
Mentioned below are top five Passive Income Avenues.
1. Inheritance.
Didn’t we all wish we had a rich uncle who loved us so much that he decided to name us the beneficiary of his entire estate? It only happens in movies from my recollection, but this is by far the quickest and easiest way to benefit from a passive cash windfall.
2. Interest on Fixed Deposit.
I like this avenue because it not only provides a nice passive stream of income, but also protects your hard earned capital. The challenge in capitalizing from this passive income stream is obvious. You need to build a capital base first on which you can earn the income. For example, if you have $2.5 million lying around (or perhaps inherited it! 😛 ), and you invest in stocks with a 4 percent dividend payout, you’ll make a cool $100,000 per year in passive income.
3. Royalties or Franchise Fees.
I wish I had the genius to come up with an idea or patent and license it out in exchange for royalties. If you’re the Rolling Stones, that track that you recorded for (I Can’t Get No) Satisfaction creates passive income every month, even though you recorded it years ago.
4. Rental Income.
This is one I currently capitalize on and enjoy a lot. I would like the cash flow that I would receive monthly, the equity I build with each passing month (mortgage balance is reduced over time), the potential long term appreciation of the property and the short term tax benefits from depreciation and what have you.
5. Internet Income.
You can’t deny it, but you GOTTA love this one. Aside from a fat inheritance, what other platform allows you to create something (a lot of things) from nothing? With a mere $10 investment in a domain name and another $20 in hosting, you can be flying with the pigs.
We currently capitalize from multiple income streams from my portfolio of niche websites, affiliate commissions, and a few others. The success of our websites and blog has also led to several one on one coaching. Very rewarding…
Negative side. You can toil for years before the fruits of your labor start paying off. From personal experience, once it starts raining, it pours.
Concluding Thoughts.
I don’t think anything can get any more passive than inheriting wealth, but aside from that unlikely scenario, interest income on your savings is the epitome of passive income in my humble opinion.
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Feel free to add any of your favorite passive wealth or passive income avenues below.
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