Passive income is the type of income that keeps on generating revenue for you even if you are not working actively. Sounds interesting? I am sure it is. So, let us first understand how passive income is different from active income.
When you are working at a regular office job, you are basically paid for the amount of hours you are working. You do get some paid leaves though. What do you think would happen if, for some reason, you need to take an extended leave? Many of you would be aware of sabbatical leave which some employees take for higher studies. They do not receive salary during that time period as they are not working during that period.
On the contrary, it’s quite the opposite in the case of passive income. For example, let us take the example of a person running a YouTube channel. Let’s say the person worked hard to gain 10,000 subscribers and his videos on an average garner 10,000 views. Even if the person does not post videos for a couple of months, he would still get revenues from YouTube from his older videos. That is what passive income is about. I agree you can not stop posting videos entirely because if you do, over a period of time, your revenue will start decreasing as people always look for fresh content. But I think you got the point of what I am trying to say.
So, I hope you now got the idea of passive income. Let us try to understand the importance of having passive income.
1. Freedom
You will have more freedom if you don’t need to rely on the salary of your regular income. For example, let’s say you are deferring your travel plan to a foreign destination because of your budget constraints. Now if you have a side income, don’t you think it will help you to visit your dream country soon? This is just one example. Basically, you can live your life the way you want it to be without needing to worry too much about money.
2. Acts as a backup
In an unfortunate scenario, let’s say you lost your job. Now if you were relying entirely on your office salary for your monthly expenses, how would you be able to manage without your salary? Since you have a passive income, you can still use that money for meeting your basic expenses such as paying rent, bills, etc. Therefore, it is always good to have a passive income. It will act as a backup for you when you will not have your regular income.
3. Opportunity to earn money through your hobby
Many people get stuck in their office jobs even if they do not find them enjoyable. Are you in a similar situation? If so, you can think of earning money with the help of your hobby. Make your hobby a source of your passive income. Even if you are not happy with your office work, you will find it satisfying if you are able to impart your knowledge on your hobby to others. For example, if you are a wonderful guitar player, you can open a YouTube channel and teach others how to play guitar, and sometimes you can play as well to entertain others. Don’t you think it will be satisfying?
4. Reduces stress
Your stress level goes down when you don’t need to worry whether you have sufficient money to meet your expenses or if you plan to go for a trip. For example, let’s say a person has a home loan and a car loan. Wouldn’t it be better for that individual to have an extra income source so that he still remains financially strong in spite of having multiple debts? This is not only a better option but at the same time, passive income reduces your anxiety and stress level.
5. Source of future investments
When you have a passive income, you can think of investing this money further may be in real estate, mutual funds, etc. The more you invest, the more you can make money out of your investment. Let’s say your office job is enough to pay for all of your expenses but you are not left with additional funds to invest. That’s where passive income can help you to invest the entire amount so that you generate a massive return from your investments.
Now that you are clear with the importance of having a passive income, let us see what are the five ways of generating a passive income.
1. YouTube Channel
Start a YouTube channel in your favorite niche. Try to understand what the audience would want from that channel and accordingly you start preparing your content. Once your channel is monetized, you will start earning from YouTube. There are many full-time YouTubers who are earning massive from YouTube but you don’t need to quit your job to start a YouTube channel. Once the channel starts growing gradually and you are earning enough, you can make the call whether to quit your regular job or not.
2. Start a blog
If you are good at writing, you can create your own blog. It’s a great way of showcasing your talent to the entire world. The more visitors you can drive to your blog, the more you will earn through your blog. All you need to buy is web hosting and a domain to start your blog. The investment is minimal but the potential to earn is huge.
3. Write a book
You can also start writing books. Nowadays, it’s easier to publish books with Amazon Kindle Direct Publishing. You will earn royalties for each sale. It’s a great way of generating passive income. It may take time to write a book but once you have done the hard work, you will continue to get royalties as your book sells more and more.
4. Affiliate Marketing
There is a great potential in earning through affiliate marketing. If you have your YouTube channel or your blog, you can provide your affiliate links for the products. If people click on those links and purchase a product, you will get some commission. For each purchase, you will get a commission. Your earning potential increases as and when more people are clicking on those links. Many people are earning through Amazon and Flipkart with their affiliate links.
5. Real estate investments
Investment in real estate is another great source of earning passive income. Let’s say you purchased an apartment and gave it for rent. You will now have a stable rental income every month. If you have more funds with you, you can purchase multiple apartments and generate a hefty rental income.
Conclusion
Except for real estate investments, none of the other ways mentioned above requires a huge investment. So, why wait? Start now and you will soon realize the importance of having passive income. Note that passive income can also act as a source of your motivation to achieve your dream.
Is there anything you want to add about the importance of passive income? Let me know in the comments below.
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