Instructions to get checks in the mail with no extra effort.
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In recent years, passive income has been hailed as an almost perfect approach to wealth creation that appeals to entrepreneurs, investors, and average professionals alike. But the promise of effortless income generation sounds suspicious on its surface. Is there really a way to make money without working hours? And if so, is it accessible to the majority of the population?
The idea behind passive income
Strictly speaking, passive income is any type of recurring income that is achieved without constant time and effort. Wages are paid hourly and salaries are paid annually, both types of remuneration depending on whether you work a certain number of hours. these are not passive. Instead, a passive source of income is one that regularly sends you a check by mail without you having to bother.
Relatives: 7 ways to earn additional income with a full-time job
Common examples of residual income
To better understand what passive income is and how it works, let's take a look at some of the most common examples of passive income in action:
- Dividend-paying shares. First, there are dividend-paying shares. Shares represent a fraction of ownership of public companies. In many cases, these companies choose to distribute profits regularly in the form of quarterly dividends. Shareholders can expect a fixed amount of quarterly earnings based on the number of shares they hold.
- A monetized blog. If you start a blog that generates a significant amount of traffic in the region of thousands of visitors per month, you can monetize it using ads, affiliate links, premium content or other paid features. You earn part of your sales based on the number of people you attract, the number of sales you make, or other factors.
- Rental properties. With rental properties, you can buy a property, win a tenant, and collect a rental amount that exceeds your monthly expenses. With a decent profit margin and a few properties, this can lead to a lot of income.
- Digital goods. You can also earn residual income using digital goods such as eBooks or stock photography. After developing and consistently marketing these digital goods, you may be able to generate recurring income from all of your future sales.
The "passive" income myth
All of these methods have been shown to generate income. In addition, they were responsible for the development of many homemade millionaires. However, it is not the "income" part of the term that we are concerned with, but the "passive" part of the term.
Passive income is rarely literally passive; While these (and other) passive sources of income may require less effort than a full-time job, they may require effort in other formats and contexts.
Let's look at these:
- Stock analysis and initial capital. Investing in dividend stocks is not difficult, but you still have to spend time researching which stocks are available to maximize your return. In addition, you need a sum of the initial capital to achieve a meaningful flow. Many dividends only pay 2 to 4 percent a year. So if you invest $ 100, you won't get a big return.
- Blog setup and maintenance. According to The Blog Starter, starting a blog is easier than ever. But even if you have a good plan, there is no guarantee that you will be successful. It takes a lot of time to create content for the blog, research your target audience, and refine your approach over time. “Since you also have to create new content regularly, even a successful monetized blog requires at least a part-time job.
- Real estate research and maintenance. Investing in rental properties requires substantial start-up capital (similar to investing in stocks). To be successful, you need to carefully research and review every potential object. You will also need to maintain your property and manage tenant turnover, or reduce your profits by working with a property management company.
- Digital good development. If you want to sell an eBook or photograph, you first need to produce these assets and then look for a service like Shutterstock where you can sell them. This often requires dozens or even hundreds of hours of preparatory work, and then you have to market your work.
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Some people have claimed that residual income is a myth, but it can be a little extreme. Instead, a more accurate assessment could be that passive income is not really passive. No matter what happens, you still have to invest time and effort for your income-generating strategy to work. It just has a different format than your traditional job.