What is passive income and how do you get started?
Most likely, everyone knows that income is the money or funds received for a certain activity, and the types of income are divided into passive and active. Active income is the income we receive by directly exchanging our time, added value, or work done for money. Most of the time, in order to earn from active income, you will need to devote a lot of time and effort to it, the best example of this is salaried work, for which you receive a pre-agreed salary.
But things happen in life and having only one source of income is risky, because if you were fired or could no longer work for personal reasons, you would lose your main, and in many cases, your only source of income, so it is said that it is best to have at least several because if you lose one, you will still have others.
Having multiple sources of active income is difficult because it requires a lot of time and effort, so it is worth considering passive income.
Passive income - what is it?
Passive income, in contrast to active income, is obtained with much less effort. Of course, you need to spend a little time in the beginning, but then you don't need to put in extra effort to get at least a minimum income. One example: you upload your photos to a page where people can download them, and you get paid for it, so you get a little bit of income without getting involved in the further process. Passive income can also be understood as an additional activity that you carry out after working hours (after your main activity) and that generates at least a minimal additional income for you, one example could be your online store where you sell all kinds of small things.
Types of passive income
Every year we come up with new ways to earn passive income. These methods differ in their riskiness, possible returns, duration, and nature, so everyone can choose the most acceptable method for themselves, and in this article, we will discuss the main and proven methods to earn passive income
Passive participation in business
A frequent resident dreams of starting his own business, because it may turn out to be an easy way to make quick money and retire early. However, creating a successful business usually requires a lot of effort, time and not being afraid to take risks. But if you are determined to create a business, it can become an excellent additional source of money in the future, which can generate both active and passive income - it depends on which path you choose. You will get passive income from the business when you are not actively involved in the business, and after it is created and successfully developed, you will hire people to manage the business for you, otherwise, it will not be a full passive income, because you will continue to spend time on business matters.
Property rental income
Another way to earn passive income is to rent out property that you don't need at least temporarily. After all, we only use some things once a week, maybe even once a month. Such property can also bring you additional income, you just need to rent it out to others. In this way, you will free up space and earn extra money.
Property Rentals and Airbnb
One of the things we can rent out is real estate, maybe you don't have a car at the moment, so the garage will sit empty for at least another couple of months. Or perhaps you are going on vacation to Turkey for half a year and the apartment becomes unnecessary during that period? In both cases, we can rent out our apartment or garage for a longer period of time and thus earn extra money. And if you don't want to rent your property for a month or a week, you can use short-term rental and rent your apartment for a shorter period. One of the most popular platforms that you can use is Airbnb, where you can not only find a place to stay yourself but also find a tenant who will stay with you for a few days. This way you will be able to create a source of passive income. It is true that it should be mentioned that both short-term and long-term rentals have their own risks and it will take time to rent an apartment or a garage, you will need to find tenants, show them around the premises, solve their if problems arise, and there is also a risk that the property will be damaged. The same is true with short-term rentals, as after each stay the apartment will need to be cleaned and prepared for the next guest, and the risk of damage to the property remains.
Renting a car or other property
If you don't have real estate, maybe you have other things that you don't use. It could be a car that you can rent out to city guests who have come for a weekend to visit the most visited sites, or maybe you have a pump, an ironing system, or a more expensive board game that you could rent out for the weekend. Sometimes it pays for people to borrow an item instead of buying it if they will only use it a few times. This creates an opportunity for you to earn extra by creating a source of passive income for yourself.
Another way to get extra income is through your authored works, where you create added value and get paid for it.
For example, if you are interested in travel and like to write, you can create a personal blog about travel. If your articles get a lot of attention from readers, you will be able to advertise travel agencies that will pay you for attracting travelers. Another example would be a YouTube account where you talk about how to take care of your pets, how to train them, etc. if you create interesting content and get a lot of views, not only will you be able to promote the company's products for pets, but you will also be able to earn from the ads that Youtube itself will insert into your video. You can come up with more such and similar ways, it is important to assess yourself in what you are interested in and what abilities you have because it will be much easier to use your talents and get additional income.
Passive income from investments
One of the most popular sources of additional income is investing, because anyone can do it without spending a lot of time. There are various and very different ways of investing: stocks, bonds, crowdfunding platforms, etc.
Briefly about each of these investment methods:
These are corporate securities that give their owner a certain right to participate in the management of the company. There are two ways to earn from shares: after buying shares, wait until they become more expensive and sell them, or wait for the dividend payment period, during which, basically, large, already successful companies pay a part of their earned profits to their investors. Investing in shares is one of the riskier ways to both invest and secure passive income because there are many companies and even if it seems that a large, successful company has been chosen, no one can predict how the company will do in the future. However, along with the risk, there is an opportunity to earn more if you buy the company's shares, and over time the company is successful and the share price rises.
These are issued debt securities, which upon purchase confirm the holder's right to receive from the company/country that issued the bond, etc. the nominal value of the bond in terms specified therein. After investing in bonds, the payment terms, debt repayment date (bond redemption date), and investment conditions - how much interest will be received - are known in advance. Compared to stocks, bonds are a less risky investment method, but the potential returns are also lower.
By choosing this investment method, you will invest in business loans with mortgaged real estate - you will lend money for the development of real estate projects. On these platforms, a large community of people pools the required amount in small amounts and lends it to real estate developers, who pledge real estate assets to the investors for this loan as one of the collaterals that make investing safer. The crowdfunding platform itself acts as an intermediary that checks projects and performs all other administrative work. Investing through such crowdfunding platforms yields an investment return of 8 to 14% annual interest. You can find out exactly how much you will earn in the investment calculator.
Before investing, it is very important to consider several aspects:
First of all, your risk tolerance, because investments differ in their riskiness - some are safer (deposits, bonds), others are more risky (shares, cryptocurrencies), and crowdfunding platforms are in the middle. Your potential investment return will also depend on the risk you take, because the more risk you are willing to take, the higher the return you can expect, and the more you can expect to lose some or all of this money.
In addition to the risk, you should also assess the minimum amount from which you can invest it is worthwhile because it depends on the institution, but for the purchase of shares or bonds you may have to pay administrative fees, so when investing a smaller amount, these fees may seem quite high. As for crowdfunding platforms, it is possible to invest in them from a relatively small amount - from one hundred euros, and Profitus investors are also not subject to any administrative fees.
Where to invest 100 euros?
This question is often asked by those who have recently started or are just thinking about investing because it is believed that you need to have very large amounts to start investing. This is not true, because you can start and try out the investor's chair for just 100 euros - on the Profitus platform, this is the minimum investment amount from which you can start investing in business loans. And if you have more funds that you want to employ - you can divide your investments by 100 euros and invest in several projects, thus reducing the investment risk.
Advantages of passive income
Having at least a few sources of passive income is necessary because it helps you accumulate the capital you want much faster, and it also makes you feel more secure and prepared for life's contingencies. At first it can be difficult until you learn how to create a source of passive income, but setting a goal and understanding and using your talents and skills will make this journey easier, and the specific way we will earn these passive funds is up to us. We recommend that you try at least a few sources of passive income to find out which method works best for you.
Investing always involves the risk of losing part or all of the investment. We recommend investing responsibly and diversifying your investments.