Is Passive Income Just A Fluff? How easy it is to create passive income inside our life so that we need not depend on our active income anymore? In all honesty, it takes time and its own not easy but it’s possible if we take one step at a time.
Many years back, while I first got to know the concept of financial freedom and creating passive income, I used to be inspired and motivated to achieve it. However, after a while, reality sets in and I realize it’s much less simple as it seems. There are some lessons that I learnt through the years that I thought will be good to talk about in this article. Is Passive Income Just A Fluff? Passive income is money gained even though we are not focusing on it while active income is money gained through exchanging it with time. Most of us have careers to make money for our day to day living.
We use time to switch it with money. Each day It might be 8 hours or 10 hours. While passive income requires time to build, the right time spent is not fixed to certain hours and more often than not, the time spent to generate passive income should be much lesser than active income. Passive income can come from dividends from stocks, rental income from property, online marketing etc. I’ve seen people who actually have more than enough aggressive income to maintain their lifestyle without depending on their active income. This is achievable but exactly what does it try to achieve it? Let’s look at dividends from stocks as a form of aggressive income first.
One of the most typical form of aggressive income is dividends from stocks. You can find individuals who are already getting a few thousand dollars from dividends each and every month typically. This is like obtaining a salary on a monthly basis without going to work. Monthly 2083 in dividends. 1 Million stocks portfolios.
This is the reality that we need to acknowledge and then we could work towards this focus on step by step. The next common form of passive income is rental income from properties. Before, people who bought properties at a minimal price and lease it out are earning good passive income off their properties now.
Because of the low price back then, those who bought good properties will likely get quite a good positive cash flow even right after paying their property loans. If you’ve read the book “Rich Dad Poor Dad”, you’ll learn that properties need to generate positive cash flow for this to be always a good asset. Assets put profit our pocket while liabilities take money out of our pocket.
Nowadays, its getting harder to create positive cashflow from properties in Singapore as price is high and local rental is much less good any more. Also, with multiple federal government cooling measures, it makes it even more difficult to invest in good properties now. Yes, we can still make money using renting out properties but the yield may only be a low of 3%-5% per year. How to begin creating aggressive income?
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We need capital to make passive income, the more the better. 500,000, the passive income we can create is a lot greater. Building energetic income requires commitment however the more we earn and save, the faster we can create more aggressive income for our future. Active income will be lower in the beginning of our working life and only increases even as we get more experience and upgrade our skills.
I’m in my own 3rd job now and have made a conscious work to plan and upgrade my skills to be able to earn higher income. We have to start in building a passive income no matter how small it is somewhere. 10,000 savings I started investing in stocks. 50 per month back then. Starting small is important even as we can make mistakes and earn along the way.