Investing & Retirement & Saving Josh on 09 Jan 2009 05:31 pm
Creating Passive Income- The Utopia of Personal Finance
All this week on Centsability to Wealth we are going into detail on each of my four steps to financial freedom. So far we have covered strategies for paying off debt, how to open an emergency fund, retirement accounts and how to open a Roth IRA. Today is the final step, creating passive income.
What is passive income?
Passive income is any form of income that is derived while an individual is not actively involved. It is the ultimate achievement in personal finance. Many people consider the true measure of “financial independence” to be when your passive income equals or exceeds your expenses.
I believe financial independence can mean whatever you want it to mean, however there is no denying the importance and power of passive income. Create enough of it, and you may never have to work another day again. Creating the passive income, on the other hand, could take a lot of work and/or money. Let’s go over some of the different ways to create passive income.
Ways to create passive income
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Real Estate- Real estate can be an excellent form of passive income. By buying a property and renting it out to others, any cash flow becomes passive income.
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Dividends from stocks or bonds- Any dividends paid out from your stocks or bonds is passive income.
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Network Marketing- The phrase network marketing has a lot of negative connotations thanks to a lot of scams, but there are legit network marketing businesses out there which can create passive income for you. We will discuss this more in another article.
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Start an online business- This can be anything from a website that sells goods to a simple blog that makes money off ad revenue. It takes a lot of work, but there are several success stories from people who have created passive income online.
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Create a trademark, copyright, or patent- Inventing or creating original content that can be copyrighted, trademarked or patented can lead to passive income.
As you can see, nothing on this list is easy. Most are either incredibly difficult to create, or cost money. The good news is, by the time you get to the point of worrying about passive income your debt is paid off, you have an adequate emergency fund in place, and you are fully funding your retirement accounts, so you presumably will have extra money to invest in things that create passive income.
And this is by no means an all inclusive list. There are plenty of other ways to create passive income. Basically anything you do can be turned into passive income if you can find a way for it to earn money.
Just because passive income is usually something that is achieved later doesn’t mean you shouldn’t be on the look out for opportunities now. Keep being disciplined with your spending, funding your retirement accounts and staying out of debt, and you will be ready when an opportunity to create passive income presents itself.
Passive income is not something you achieve over night. It is the pinnacle of your financial journey. When you achieve it, you can set your finances on cruise control and enjoy your time however you want.
Please continue sending any questions, suggestions and story tips to centsabilitytowealth@gmail.com.
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