You may come across people who appear to be financially well-off, but don’t seem to work as hard as the average person. It may even be evident that they don’t work at all, at least not in the way you do. So what’s their secret? It’s likely that these laid-back people have found one or several streams of passive income.
What is Passive Income?
The textbook definition of passive income is that it’s income that needs minimal to zero effort to earn and maintain. In other words, it’s money that takes little or no work to get and continues to flow to you without you being too involved in the process. Here are some examples of passive income and how you can obtain them:
1. Interest income
This is one of the most common and conventional forms of passive income. While it involves little risk, the returns aren’t that significant. All it entails is having a large sum of money, and then depositing it in a bank to earn interest. With banks usually giving interest on deposits less than 1% per year, this isn’t a very good form of passive income unless you deposit a very large amount, to begin with.
It’s generally difficult to get a profitable passive income from banks, and you can check on how most local banks reward your deposit with interest.
2. Rental Property
Renting out property is another typical way to earn passive income. If you have a big house with extra rooms that no one uses, you can convert them to bedspaces for students or employees. To whom and for what purpose you rent these rooms out largely depends on your rental property’s location and proximity to schools and businesses.
You can also do this with a condominium unit; some people actually buy an extra property in a development that’s close to schools or a business district and rent it out instead of occupying the unit. If you choose to rent your property to transient travelers, such as foreign tourists, you can list your property online.
3. Stocks and Bonds
Investing in the stock and/or bond market used to be a passive income stream that was reserved for people with millions to spare. Now, anyone with at least P5,000 can actively invest in stocks and bonds. This type of passive income can be risky, but at the same time, the risks can be outweighed by the returns.
Another caveat about investing in stocks and bonds is that you must have a reasonable amount of knowledge about the companies you’re investing in to make a good portfolio. Not all stocks are the same, and some companies might have multiple, similar names on the market. One example is Google. Google offers two different types of stock, listed as goog and googl. Knowing the difference between goog and googl can mean having voting powers or not, and earning more dividends.
This is a good passive income stream, as long as you do your homework, or get the services of a trusted stockbroker to do the trading for you. Either way, you should keep yourself updated on market performance, and build a good portfolio to avoid losing your shirt.
4. Online Business
Thanks to the internet, there are hundreds of ways to put up an online business. You may provide services like catering, basic repair or restoration, installation, carpentry, dog-walking, pet grooming, tutoring, PLSE English tuition or virtually any service you can imagine that’s legal to offer.
You can even sell products like your own homemade food or crafts, or auction old stuff you don’t need that’s cluttering your home. You may do freelance work as a writer, proofreader, transcriber or virtual assistant. These may not seem like passive income sources, but depending on the knowledge and expertise you have, doing these freelance jobs can be a breeze.
With the advances in technology, there are more options for you to create passive income streams now more than ever. The best strategy to maximize your passive income is to try to have as many of them as you can develop and manage, then lump those earnings into a larger sum and reinvest that into property or other new passive income streams. Soon, you may even be able to live on these passive income streams and live the way you like.