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Passive Income | What is passive income and how do I build it?

For most people, work is a part of life. It gives us the opportunity to afford the life we ​​want, but what if there is a way to still make money while the whole "work" part is turned off? Thankfully, with passive income it is possible. However, it is recommended to have a kind of day job for a reliable source of income to come in.

It can be risky to start a passive income, but once established, all the time and money you spent having an unemployed stream of money will be worth it.

To help you gain a better understanding of passive income, let's go through what it is, the benefits and challenges, as well as some tips to get you started.

What is passive income?

Passive income refers to money that you earn passively, that is, without putting in too much effort. However, active income is money that you earn from the company you own or what you work for.

Active income takes a lot of hard work to earn. But passive income does not require as much direct action.

In fact, many people describe active income as "money you work for" while passive income is "money that works for you". A common example of passive income is having a rental property or renting out rooms in your home.

Benefits of passive income

It is a consistent income stream.

Contrary to many people's beliefs, passive income is for the most part a regular and consistent income stream. Once you have configured it, you may not need to do too much to nurture it. The money continues to flow in at regular intervals.

It takes less work to maintain compared to active income streams.

Passive income is the best way to make money through limited work. You do not have to provide a service or sell a product to make that money. You need to configure the passive income stream and it will work on its own for a long time.

It complements your active source of income.

Passive income is the best way to earn extra pocket money. If your active income is lower than your expectations / needs, a passive income stream can supplement your salary.

It allows you to continue your passion.

You may have taken a job just because it helps pay the bills. But you may not really like it. If you have a passive source of income, you get the freedom to pursue careers you are passionate about, because you have a steady source of income.

It gives you greater flexibility and balance between work and private life.

In some cases, people make their passive income an active way of earning. This means that you can start focusing on nurturing different passive sources of income, so that you do not have to be in a full-time job. This allows you to have a work-life balance and pursue your life goals.

Challenges with passive income

Passive income entails risk.

Passive income is stable only when the source of income is stable as well. If your source of income does not work well, you risk losing your passive income. For example, a recession can lead to low demand for rental housing, which affects your ability to earn passive income from renting out your property.

Passive income cannot sustain growth on its own after a period of time.

Your passive income stream can work very well for a few years. But as markets and industries evolve, so do your income experiences.

You need to actively monitor your passive sources of income and decide how best to manage them. If necessary, you should be willing to redistribute your investments to a new passive income stream at short notice.

In addition, a lot of discipline and commitment is required to improve your sources of income. This may not be everyone's cup of tea.

Passive income requires a high initial investment to start.

To get any of this income stream, you must put something first. This is your first investment.

For example, if you want to rent your cars to a taxi service, you must first buy these vehicles ̵

1; which can cost a lot of money. If you do not have money to invest in a passive income stream, you will not be able to make any money.

Not all passive sources of income work for everyone.

Your friend may find it easy to earn passive income by investing in stocks. But you may not have the ability to make financial investments. In that case, you need to experiment and try different sources of income before choosing one that works best for you. This can cost time and money.

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