Lifestyle
Imagine if you could make money without actively working for it. How nice it would be to see your account balance increase while lounging on a beach in the Canary Islands!
If you're like us, this is a dream of yours. And believe it or not, it's not impossible. It's called passive income.
What is passive income?
Passive income is money you earn from sources without actively participating or being directly involved. This income usually requires little or no effort, unlike the active income you would earn from a 9 to 5 job.
With passive income, you don't get paid for your time and effort as you would with a 9 to 5 job or freelancing gigs. Instead, you create or buy an asset you can earn from no matter where you are!
Although you wouldn't need to put in any effort to earn passive income, it's not created out of thin air. It requires an upfront investment of resources (money, effort, time) so that you can enjoy financial returns later with little or no effort most of the time.
What are the types of passive income?
Passive income comes in various forms, each requiring a different earning approach. Some may require capital, while others may require investing your time and skills. Below are some examples:
- Passive income sources that require capital:
- Renting out properties: you can buy and lease an apartment for a monthly or yearly passive income. Alternatively, you could buy a chalet to rent out to tourists or office space to lease to companies.
- Investment earnings: the financial returns from investing in stocks, bonds, or mutual funds can be a good source of passive income.
- Silent partnerships: if you're a partner in a company or a restaurant but are not involved in the management operations, you would be considered a silent partner, and your income would be considered passive.
- Savings accounts and deposits: although their profits are small compared to others, depositing your money into a savings account or a term deposit will help you generate passive income over time.
2. Passive income sources that don't require capital:
- Digital Products: you can create and repeatedly sell many digital products without doing anything, such as ebooks and online courses.
- Blogs: there are several ways to earn passive income from a blog, including displaying ads. The more visitors your blog has, the more ad revenue it can generate.
- Intellectual property rights: you can sell your intellectual property rights for digital products, such as music and other types of content, to parties willing to pay for them.
Now that you've learned the difference between active and passive income, it's time to test your knowledge!
Hussam receives an annual salary of 14,000 JOD, a year-end bonus of 800 JOD, 5,000 JOD from leasing an apartment, and 1,000 JOD in profits from investing in stocks. Which of these is considered passive income, and which is active income?
If you answered that Hussam's salary and annual bonus are his active income sources, while his rental and investment profits are passive income, you would be correct!
The importance of passive income
Passive income is essential to building wealth and achieving financial freedom. Because let's face it, in today's world, a monthly salary alone won't enable you to do that.
Over time, you will become more financially stable as you reduce your reliance on a monthly salary. This will help ease your financial anxiety and make it easier to achieve your financial goals.
So, don't wait! Plan to create a passive income stream to start making money while you sleep today!
