All you need to know about Passive Income
Most of you might have come across one or the other “25 din me paisa double” scheme, but we all know there is no such scheme in real life that would give such an amazing return. But there is something called passive income, which is as lucrative as the “paisa double” scheme, the only difference being that the latter is not a scam.
In this article, we cover everything about passive income and how you can employ them to have a constant source of income.
Why this post when there are already so many available on the Internet
No doubt there are already numerous posts that talk about ways to generate passive income, and we are sure that you might have come across one, but did that article motivate you enough to have your passive income sources? Additionally, most of the articles on this topic are more relevant in a US context.
This article wants to bring home the fact that passive income is essential and why you need to have few passive income sources. Also, we have tried to list down the income sources separately for a college student and working professional, unlike posts that give you a list of 30-40 ways, but you are left scratching your head thinking about which one would work for you.
Active and Passive Income
The Investopedia definition of active income is income received for performing a service. Passive income is earnings from a rental property, limited partnership, or other enterprises in which a person is not actively involved. Let me explain this through a story.
There were two people, Active and Passive, in a village, both responsible for bringing the water from a river to households in the village. Their income was dependent on the amount of water they delivered. Both of them carried pots from the village households, filled them at the river bank and delivered them again to the respective homes. Active continued the same way, but Passive laid a pipeline from the river to the village. One day, both Active and Passive were hit by fever and could not work, but Passive continued to make money because of the pipeline he laid, but Active couldn’t earn a penny.
Thus, in layman terms, active income is the income you get when you work, and passive income is the income you get even when you sleep.
What is not Passive Income
Amount earned α Effort required
The rule of thumb is that if the source of income does not follow the above rule, it is a passive source of income. Few examples which are not a source of passive income –
Your job – the whole idea of passive income is to supplement your income so that you can retire early, travel or do anything which makes you happy
Freelancing – No doubt freelancing helps supplement your income, but it is not a passive source because you have to put in the effort to get work done to get paid
Advantages of Passive Source of Income
If you don’t find a way to make money while you sleep, you will work until you die.Warren Buffet
Indeed, a strong statement from the famous billionaire Warren Buffet, but is true. Passive income is a must-have in today’s era, where most people prefer private jobs instead of secure government jobs. Let me list down the advantages of passive income if you are still not convinced. Passive income helps you –
- To attain financial freedom without relying too much on your job
- have a backup/alternate source of money in case you lose your job
- plan an early retirement so that you can travel, explore without worrying too much about bills
Having said that, let’s talk about the ways you can have this much talked about the passive source of income.
Sources of Passive Income
( We will not talk about investing here, and you will soon receive a separate post on investing)
Below we list down various sources of passive income sources depending on whether you are a college student or a working professional (Feel free to skip to the relevant part). At first, the ways might seem to require an effort, but you’ll realize that it is free money once you get into the process.
For college-going students
The main funda here is to put your skills to work
Build online courses
“Knowledge is sharing” – if you have deep knowledge about a course, subject or even a skill, what about sharing that knowledge online and getting paid for it. If you are a machine learning enthusiast or are into photography, or good at something else, you can create an online course. You can host your courses on Udemy and get paid whenever someone purchases your course.
Sell an E-book
The current pandemic has accelerated the switch from offline to online content consumption – newspapers, books, articles, and everything online. It has also made publishing your book almost free. If you are an avid writer, try to pen down your thoughts in the form of a book and earn money along with appreciation.
License your music or photographs
Instead of streaming your music on platforms like Spotify, Youtube, etc., you can consider licensing your music, and you get paid in royalties ( payment in return for using the music). Here are the steps to license your music. Similarly, you can submit your own-clicked photographs on sites like Shutterstock and get paid for the same.
Build a Mobile Application
If you are techy and like solving problems via apps, you can consider publishing your app for the users and earn money by in-app purchases made by the users or by simply putting advertisements on the app. Get started here.
Sell your designs
You can put your designs for sale – yes, you read it right. You need to design a product, and you can earn money without even worrying about the logistics – printing, shipping and customer service. Merch by Amazon is one such website that makes this process easier.
For working professionals
The funda here is to put your money to work
Saving is the key; you can use your hard-earned money to generate wealth. Nowadays, there are various investment options like stocks, gold, bonds, conventional fixed deposits, etc. Depending on the risk appetite, you can decide the investment options for yourself
Renting your house
If you own a house, then you can rent it to earn money. You need not worry if you have only a single room to spare; you can even list that on websites like Airbnb.
Through affiliate marketing, an affiliate can earn a commission by marketing other’s products. These days, all the major e-commerce companies like Amazon, Flipkart, etc., have their affiliate marketing programs. You can register at minimal cost and earn a commission if someone purchases via your affiliate link.
We have often come across Amway or Modicare, and these are examples of network marketing. All you have to do is build a network and harness it to generate sales, and you get paid for it.
We hope that we have provided you with enough reasons and ways to generate passive sources of income.
Instead of you working for money, make money work for you
That’s it from us, and we’ll see you next week. Also, don’t forget to share this article on WhatsApp with your friends.