You may have heard analysts or financial advisors tout the advantages of "passive income", a model that allows you to make money without a lot of sustained effort. It sounds great, but is passive income really something that ordinary people can accomplish? If so, what should you do?
Passive income allowance
Passive income is powerful because it allows you to continue to increase your source of income without spending more time. If you have a full-time job or just want to simplify your life, this is an incalculable advantage.
In addition, obtaining more passive income sources is a good way to diversify income sources. More diversification in income will protect you from volatility and catastrophic losses, which can happen, for example, if you lose your job or the value of a certain type of asset shrinks.
Passive income source
Before delving into the logistics of passive income, let's take a look at some of the most frequently cited examples of financial strategies.
Rental property
If you invest in a leased property, you should be able to collect a rent check from the tenant that exceeds your monthly fee. Assuming your tenants pay on time, you should make a reasonable profit every month—all without spending a lot of time to update your real estate.
Dividend-paying stocks
Many large American companies regularly provide dividends to shareholders, which is a distribution of profits. For example, the company may pay a quarterly dividend of $0.50 per share; if you own 1,000 shares, this means you can earn $50 per quarter just as a shareholder.
Blog (through affiliate marketing or advertising)
If you have a popular blog that attracts a lot of traffic, you can monetize these regular traffic with the help of advertising or affiliate marketing. An important caveat here is that you need to publish new content regularly-but if you have other guest authors doing the work for you, you can let it run independently like an idle engine.
car advertisement
If you drive regularly, you can also take advantage of visibility by selling advertising space on the vehicle. Finding a buyer can be challenging, but if you can, you can usually make money from a day's work.
Weaknesses of passive income
As you have already seen, even the most common and attractive sources of passive income have some important caveats that prevent them from truly letting go.
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Early effort
First, you will notice that most passive income sources (and other sources) require a lot of upfront work. Of course, if your blog attracts thousands of visitors every month, you can make a lot of money through advertising, but to attract thousands of stable visitors to develop your blog, it takes months or even years of hard work . Likewise, it takes a lot of research to find a rental property worthy of your investment, and you even need to conduct due diligence before choosing a dividend stock.
Capital needs
First, many passive income strategies require you to own capital. For example, if you want to buy a leased property, you can get a loan, but you still need to pay a deposit. If you want to get a decent income from dividends, you need to own a large number of shares.
Ongoing maintenance
Even the most "passive" source of income is not really labor-saving. If you want to manage a rental property, you need to make repairs, respond to tenant requests and fill vacancies when you encounter them. If you are running a blog, you need to update it regularly.
Income
Most sources of passive income are not known for small profits. For example, most companies’ dividends are between 2-4% per year; even if you invest $100,000, it is only equivalent to an annual income of $2,000 to $4,000. A good rental property can only generate a few hundred dollars in profit per month. There are more fancy strategies, such as advertising on your car, which may make money for you almost from time to time and cannot eat an extra meal.
Bottom line
So what is the bottom line here? Passive income is a "real" concept and a fully achievable concept, even if you are an ordinary investor without a lot of cash. However, these are not plans to get rich quickly, and passive income may never be completely passive.
In other words, a series of passive income sources can diversify your holdings, increase total income, and ultimately create a brighter financial outlook for you.
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