Being dependent on one income stream can be incredibly stressful. Having more than one way to bring in money is much more secure (and better for your health), especially if you have a few passive income streams. If you understand how passive income works, you can discover ways to make your time and money support a better lifestyle. Here’s what you need to know.
What Is Passive Income?
There are two types of income: active and passive. Active income is the money you get for a product you make or a service you provide. If you have a day job, that’s a type of active income. By comparison, passive income gives you money based on time or money you already invested.
Not all passive income types are 100% passive, and it’s important to keep that in mind. For example, leasing a property provides income you don’t necessarily have to break down by the hour, but you’ll probably put in some time on a regular basis to manage it. Meanwhile, putting money into a certificate of deposit or other fund is a truly passive income because you can set up a deposit and then forget about it while you earn interest or dividends. The right passive income stream for you depends on the time and money you have available to put into it.
Why Is Passive Income Important to Build Wealth?
In today’s world, you will likely find it easier to build wealth using a combination of passive income streams than you would by increasing your active income workload. Active income requires constant work in exchange for payment; if you’re not working, you’re not earning.
Passive income allows you to earn money constantly, with a minor investment of your time and sometimes no time needed at all. Having a few passive income streams gives you monetary support in the immediate moments, while allowing you to build a path to a healthy, happy retirement.
Passive Income Ideas
If the idea of living off your investments feels difficult to imagine, you’re not alone. Everyone has to start somewhere, but it doesn’t take much to begin. Try one or more of these popular passive income streams.
Invest Money in Funds
The most obvious passive income options involve investing your money into certificates, bonds, stocks and other funds. You put the money in, keep track of your progress and withdraw your money only when it makes sense to do so. If you’re short on cash, start with a savings account. Over time, you’ll have more money you can put into a fund with a better yield.
Rent Your Property
If you own some property, you can rent it out when you don’t need it for extra money. Renting a second house to a long-term tenant or posting it on vacation rental apps could provide income to help cover the expenses to maintain the property. You could even rent out your vehicle or technological equipment.
Monetize Your Hobbies
If you already invest a lot of time into a hobby, you may be able to monetize it without having to produce more. For example, if you enjoy restoring antiques, you might be able to earn passive income with a blog or social media channel about your projects. If you have a great deal of expertise, you could also produce eBook tutorials or instructional guides to sell.
Everyone deserves support building wealth, and passive income gives you a great way to achieve it. By exploring passive income streams, you can start to create a comfortable future for yourself. For more passive income ideas, check out the accompanying resource by Renovo Financial.
This infographic was created by Renovo Financial, a real estate loan company