What is passive income
Before we move on to the question of how to earn passive income, let's define the basic concepts.
In total, there are two types of earnings - active and passive. Comparison will help you understand how they differ.
Active earnings are the principle of life for most people. It means:
- receiving money for the work performed;
- termination of financial receipts in case of job loss;
- no need for capital investments;
- constant large expenditures of time;
- high risk of being left without a livelihood;
- lack of prospects for financial independence.
Passive income, or residual income, is a type of income that does not require the performance of regular active actions. Funds are credited to your account, thanks to investments or work completed earlier. The benefits of passive income:
- monthly profit does not depend on the number of hours worked;
- profit increases with capital investment;
- there are no constant labor costs;
- guaranteed profit and financial independence.
Obviously, the second way is much more profitable and more comfortable. Therefore, today we are talking about how to earn passively and share working ideas. Experienced investors are advised to create multiple sources of passive income. Then, in case of problems with one of them, there will always be a fallback.
Types of passive income
There is a common misconception: passive income is only for the rich, and if you don't have tens of thousands of dollars on your account, there is no need to even think about how to create a permanent source of profit. In reality, this is not the case.
There are four types of earnings that require the minimum participation of the recipient of funds:
- intellectual;
- marketing;
- investment;
- legal.
Passive income from intellectual work is provided by copyright. It protects scientists, inventors, artists and composers, writers and filmmakers. The results of their activities can be patented, copyrighted, and for the right to use, you can consistently receive interest. Several such inventions or successful works will provide the author with a comfortable life-long existence.
Marketing liability - earnings from creating a network business, website or brand. If you are interested in how to create passive income from scratch, pay attention to this particular type of earnings. Its advantage is the minimum initial investment. In addition, the network business can be developed in your free time, giving it as much attention as your main job allows.
Investment liability - investing in other people's business ideas. If you don't have your own ideas on how to create passive income, take a look around. A huge number of aspiring entrepreneurs are literally burning with ideas. They will be grateful for your financial support, and you will receive passive income in the form of dividends.
The legal liability is income from the state. In the Russian Federation, there are enough categories of people who, according to the law, are entitled to social payments, pensions, benefits. The grounds for obtaining legal income can be problems in the family (orphanhood, loss of a breadwinner), health problems (disability), and the status of a single mother. Pension also refers to legal liability. It can be by seniority or by age.
How to create passive income from scratch
Unfortunately, not everyone has extraordinary creativity or intelligence. Not everyone is ready to develop their own website for years or wait for a hobby to start making a profit. One thing remains - investing. But to get money, you have to take it from somewhere.
If you already have a certain amount of money at your disposal, the specialists of the business brokerage company will offer you hundreds of passive earning ideas. If not, you have to make an effort.
There are only two ways to reformat life: accumulation and use of borrowed funds.
Let's discuss how to create passive income by saving money:
- Calculate current costs: expenses for food, housekeeping, utility bills, travel, clothing, etc.
- Consider additional sources of income.
- Clearly define the amount that you can save on a monthly basis with your current active earnings. You can save all the additional earnings, the percentage of the main, the percentage of the total. You can set a goal to save a certain amount every month.
Accumulating funds can be perceived as a long and arduous journey. But if you treat the process as a game, there will be excitement and ideas on how to organize passive income.
The second way is to take out a loan. If you have already decided how to organize passive income, but you need funds to buy equipment, real estate, a ready-made business, contact a financial and credit organization. Calculate how much the monthly payment will be. Compare this to your expected return on investment. The loan is justified if the second number overlaps the first.
5 passive income ideas
There are many ways you can earn money without making any special efforts.
Renting out premises
An excellent idea of obtaining passive income for those who have idle real estate in the capital and other large cities of the Russian Federation. So, the average price of renting an apartment in Moscow today is:
- 37,000 rubles for a one-room apartment;
- 59,000 rubles for a two-room apartment;
- 108,000 rubles for a three-room apartment.
At the same time, practically no effort is required on the part of the landlord. Earnings are stable from month to month. Office and retail space generate more revenue, but they also have a higher risk of downtime.
The disadvantage of earning money on rent is the need to regularly carry out minor repairs, cosmetic repairs. Therefore, carefully draw up a lease agreement: be sure to write down what breakdowns and malfunctions the tenant undertakes to fix on his own.
Risk - in case of an unstable situation in the real estate market, tenants may ask to reduce the rent. Do not give in - they will move out. It is difficult to find a tenant for large premises during the quarantine period. Therefore, if you are planning to buy real estate for rent, choose one or two-room apartments.
Bank deposit
This is not only a source of passive income, but also savings for future investments, because at the end of the contract, your money will return to you. One piece of advice - cooperate only with reliable banks, private credit organizations are too risky an undertaking, even despite the promised high interest rates.
The rates on deposits with Russian banks in 2021 are 4-6%. But you need to focus not only on profitability, but also on other parameters of deposits.
Bank deposits are:
- open for replenishment;
- closed for replenishment;
- open for withdrawal;
- closed for removal.
There are combined options. General rule: closed deposits for replenishment and withdrawal promise a higher percentage, but at the same time the client does not have access to his own funds for a certain time.
The situation with open deposits is the opposite - the client can replenish the deposit and withdraw money at any time. The bank considers such deposits to be unstable, therefore, assigns a lower percentage.
They also distinguish short-term and long-term deposits. The longer you trust the bank with your savings, the more profit you will receive in the end.
Leasing of advertising space and their sublease
A popular type of income that is actively used by large retail chains. Billboards in supermarkets are a store's advertising income, not a personal wish of a marketer. How do you earn passive income when you have much more modest assets at your disposal?
Place a poster on the wall of a private house, a board on the balcony of an apartment overlooking the main street. Also popular are car wrapping, printing on the back of your products, etc.
The easiest way to find such offers is on the Internet: groups in social networks, thematic blogs. Advertising income is a stable, small, but absolutely risk-free option.
Entrepreneurs should consider subleasing advertising space in rented space. This is passive income and the opportunity to get back part of the monthly expenses.
Intellectual activity
If, thinking about how to earn passively, you understand that financial investments are not your option, think about what you can do better than others. Artists can sell the rights to use their illustrations to publishers, authors of books. Psychologists and managers - to create effective models of employee motivation. Engineers - patenting equipment improvements. Programmers - develop applications for mobile phones, site management systems, or the sites themselves.
Buying a ready-made business
Still, the most profitable idea of passive earnings is buying a ready-made business. Yes, it requires an initial investment. But, unlike dividends, monthly income from the first month can cover all your needs. The case has already been put on the rails, often an effective manager is engaged in operational management, and the new owner can only control the process. Moreover, his efforts can be so insignificant that such profit can be safely considered passive income.
The most important thing is not to be mistaken in choosing a project:
- analyze a niche;
- analyze competitive offers;
- perform a financial audit;
- eliminate all possible risks - overdue loans, initiated bankruptcy proceedings, damaged reputation with recipients;
- test the equipment;
- make sure that the staff is fully staffed.
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