When people hear the phrase “passive income,” they think of a get-rich quick scheme of earning wealth. But passive income is still like other sources of income that requires you to put in the work upfront. By its definition, passive income includes any regular earnings from a variety of sources other than your job or business.
A passive income can come in many different forms. A business in which one is not active involved is considered passive income. Having a rental property, earning royalties from a graphic novel, or earnings from trading like stocks or ETF trading are other popular examples of passive income.
In practice, having a different source of income other than your main job or business means exerting some effort to do additional labor. For instance, your passive income source may require you to your website, create new content for your vlog, monitor financial assets, or keep your rental apartment well-curated and maintained. In order to keep the passive earnings flowing, you still need to put in the work if you want to sustain this other source of income to help you become more financially confident in the future.
To be clear, passive income does not exactly mean getting a second job on top of your main work because a second job means that you have to show up constantly and do the work to get paid. Passive income simply means having a mechanism to gain a consistent stream of income without requiring you to show up every day to get things done.
While investing can be a form of passive income like ETFs trading, mutual funds, and annuities, keep in mind that only assets that earn interest or pay you with dividends can be considered as passive income. Other paying assets or stocks that considered non-dividend, such as cryptocurrencies, no matter how popular they are these days, will not earn you a passive income.
The advantage of having a passive income is that you can still keep your job that you love while having money come in. This kind of income can also help you build a safety net and tide you over in case of an emergency or when you decide to leave your job to seek greener pastures or take a mental health break from work and life. Having a passive income is a great way to generate extra cash flowing into your financial accounts not matter the condition of the economy. As inflation rages and as the economic events continue to challenge your purchasing power, having this solid, reliable stream of extra income can be very beneficial since you will not have to worry about dipping in to your savings account when the going gets tough.
Building wealth through having one or two passive income sources can be a critical method of securing your own financial future. If you are unsure that your current salary from your job is not exactly enough to help you establish a retirement fund, considering getting passive income from a range of sources gives you additional security to ensure that you can thrive no matter what challenges come in your future.