Are you hoping to make enough money from your current job so that you can retire? If so, then you may need to rethink your plan. Things have changed from the days of your parents and grandparents. In the old days, you could work for the same company for 30 to 40 years and you could retire with a nice pension plan. This is no longer the case today due to fewer workplace benefits and lower wages. While your earned income may be enough to pay your bills, it may not be enough to finance your retirement. The solution may be found in creating more passive income.
So, what is passive income anyway? Passive income is any income that you receive from any activity that you are not actively working for. You don’t have to be actively involved in a business venture to collect passive income. Passive income can come in many different forms including rental properties, dividend income, partnerships, and royalties. Think of passive income as a residual income stream that just keeps flowing. This differs from active income which is income that you have worked for. Your salary, commission, and bonus are all active income that you receive due to services or labor that you perform.
Our society does not place a heavy enough emphasis on making passive income. We are taught to work for 40 to 50 years and then attempt to retire off of our active income. This may work for a few people but the majority of the population will not be able to retire on active income alone. Wage growth has been stagnant for the past decade and employers are paying less than ever. The way to financial freedom is to create a passive income stream. Generating passive income means letting your money work for you. Passive income does not require you to be directly involved in earning it. This frees you up to accomplish other tasks while your money continues to grow.
The key to accruing wealth is by building multiple streams of passive income. The goal is to have a consistent cash flow coming in from several different sources. The problem with active income is that there are limits to it. There are only 24 hours in a day and you can only work so many of those 24 hours. You are not earning any active income when you are not at work. Active income will stop if you become fired, laid off, ill, or unable to perform your job duties. There is only a finite life to earning active income. Passive income, however, can keep flowing for the rest of your life. Passive income can also help you maintain your emergency fund.
Even if your passive income stream doesn’t end up making you rich, it can help with car payments, build the kid’s college fund, or help you catch up on some bills. In these turbulent economic times, every bit of money helps. Next, we will take a look at five strategies for earning passive income.
What are some of the ways that you are earning passive income?
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