What is passive income and what are the sources and benefits of the same?



What is passive income?

Passive income is that source of income that comes in your bank account even if you have little or no involvement in the source of that income stream i.e. you might be chilling with your family or friends at a hill station and your bank account would still keep getting credited each and every day without you being actively involved in the setup from where the income arrives.

 Passive income is a way to make your money work for you or your one-time efforts give you a sustainable income for a long period of time. You need to start building these sources as soon as you can. This is a sure-shot way to create a side hustle and quit the 9 to 5 race before 40. 

 What are the sources of passive income?
  • Hardcover books and Ebooks: With some efforts put in initially you can create great content for a certain audience by putting it in an e-book or hardcover book. With Amazon KDP, publishing your books is just a click away. One can earn for a long time from the same book if the book is marketed right and adds value to the audience.
  • Dividend Income from stocks: A simple way to earn regular cashflow is to invest in stocks of matured companies in order to receive regular dividend income from your investment. This method gives you cash inflows along with capital appreciation in stock prices.
  • Mutual Fund Returns: Investing in Index funds or AAA-rated debt funds or simply good quality liquid funds is a good way to make your money work for you. However, keep in mind that investing in debt funds should be done carefully because if you go for schemes with low rated bonds in the portfolio, situations like COVID might make your investment illiquid just like the Franklin case of 6 funds.
  • Rental Income: Real estate is another avenue where your involvement to earn rental income and capital appreciation on your property is low. You can get regular income due to the lease agreement. The only downside is sometimes your property might be vacant between the transition of lessees.
  • Online courses: Have you heard of websites like Coursera or Udemy. These websites have lakhs of online courses. These courses also once developed have the ability to tap the audience (i.e. students, employees etc.) from across the world. Develop an online course on a certain skill and you might earn for years with the same online course.
  • Games Development: Have you observed how these games these days have a lot of ads in between. I know it's very annoying but did you know these games earn huge profits by showing these ads on their platform. If you are into developing apps and games, this can be a huge source of revenue if you develop an addicting game.
  • Car rental: Do you own a car or more than one car? Well, a lot of people do but do you use it daily. No, right. This is a lost opportunity cost. These days apps like ZAP Subscribe allow you to share your car and in return get rental money on your car for that period. Also, if you will call a car taxi service near you, you will see that car rental is a common business for many people.
  • Vending Machines: Have you seen those machines where you put in a coin and the machine drops in whatever product you choose. I bet you do. The vending machine business is on the rise and doesn't even need any human resource. Only with some inventory management, which can also be done from a simple mobile phone app, where you get a notification from the machine to restock, can make you some good money.
  • AudioBook: Just like ebooks, a new form of delivering information is audiobooks. No wonder audible has more than 100 million downloads. People do not always have time to read and it is more convenient to listen to audio on the go. For eg. reading a book is not possible when driving but hearing it is.
  • ATM Vendor: You see a lot of ATM machines all around you, in every region of the country where banks exist. But do you think banks own those spaces for the ATM Machines? No, not really, a majority of those spaces are rented. People give banks some space and in return get rent for the same. If you have a good networking you surely have a good way to make money there as well.
  • Affiliate Marketing: Well, if you have read my blog about affiliate marketing, you know this is a sort of income where people have made themselves millionaires. This income is particularly a blessing for those who are big influencers. However, it is not necessary to be an influencer, you can still start affiliate marketing and with time your network base will strengthen and people would spend huge money to access that network.

What are the benefits of passive income?
  • Early Retirement: It can help you retire early. Yes, Joe Udo who has the website retireby40.org has stated how he worked on building more and more passive income throughout the work-life and today has enough cash inflow sources to pay the bills, live a luxurious life, and also give time to something that really interests him.
  • Financial Freedom: More the passive income you have more financial freedom, you don't have to think of normal expenses in life like higher education tuition fees or house and car loans. Your income will be sufficient to meet most of these demands.
  • Multiple income streams: Diversification is a skill and one who has multiple sources of income is at a very safe stage in his life as even if one kind of income deteriorates the another can be triggered and worked upon to set off reduction in any income and increase it thereafter.
  • More time: Once you are out of the vicious cycle of 9 to 5, you have ample time to really pursue something that interests you and serve people who are in need. It will give you an opportunity to really make a difference in the lives of people
  • Ease of movability: If you are not stuck in a desk job. you automatically have more movability and you can live at different places while still maintaining the same income from the passive income sources. You will not be answerable to anyone and can make travel plans without any hesitation.
Thanks for reading!

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Comment on any query you like me to address upon.

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