We discussed in our blog dated September 24, 2010, the importance of Passive Income in our Personal Finance. Let us discuss a few methods of creating passive income using our ‘simple and happy’ ways:
Passive income comes to you whether you work or stop working. Let us understand this through the following examples:
- First of all, set a goal on the quantum of your passive income with a specific time frame, in discussion with your family members and your Financial Planner. Do not underestimate the role of your family members; in fact, their support is very important. All your planning will go for a ‘six’ if your family members are not with you in this journey.
- Start saving and investing every month. In our program, ‘Path to Prosperity - Millionaire Basics’, we discuss how an industrial worker was able to educate his children for engineering degree without resorting borrowing because of his consistent monthly investment in PF for a period of about three decades. Today, we have better tools like ‘Systematic Investment Plans’ offered by Mutual Funds to create our passive income.
- Get yourself educated in the Stock Market and develop your ‘Risk Capital’, in consultation with your Financial Planner. One way, you may find useful, is to assign at least 50 % of the unexpected cash inflows to your ‘Risk Capital’. Start investing in shares of sound companies with a time horizon of five years or more. In a country like India, your capital gains on shares held for more than 12 months is totally exempt from income tax. What a wonderful opportunity to create massive passive income through tax free capital gains!!
- Another source of passive income is rental income from properties. Depending on your affordability and in consultation with your Financial Mentor, you may acquire property at a distant place, whenever you find the prices are attractive. Your rental income may be small in the short term but can increase over a period of time. Of course, this requires a fair amount of initial time and efforts from your side.
- Utilise the passion or hidden skills of your family members like writing, drawing, singing etc. and encourage them to come out with e-books or videos even to earn a small passive income. You never know, this may scale up to a great extent without your planning!
- Develop your blog and share your genuine experiences and let it grow at its own pace. The web world offers revenue streams in several ways like ad revenue, sales of your digital products etc.
What is important is to take some of the above steps ASAP to create your passive income. The momentum you gain matters a lot in the initial stages. As you gain experience, it is possible you will find more or better ways than the ones listed above. In fact, my dream is to hear from you such lovely experiences! Of course, in the process of creating passive income, ensure that the happiness of you and your family members is taken care.
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