Do you have a dream to retire from your regular job by the time you attain 35 years of age? Someone would laugh and say that I am joking as to how a person can retire at 35. Yes, it is possible provided that person has achieved financial independence by the time he/she attains the age of 35. But how? The coming paragraph has the answer.
“Passive income” is the one which is received on a regular basis, but with little efforts required to maintain it. In other words, it is an income from a trade or business activities in which you do not materially participate directly. Some notable examples of passive income could be such as: (a) earnings from a business that does not require direct involvement from the owner or merchant, (b) rent from a property, (c) royalties from publishing a book or from licensing a patent or other forms of intellectual property, and (d) dividend or interest income from various investments made in financial instruments like – fixed deposits, bonds, mutual funds, shares etc.
So what do we comprehend after knowing the power of passive income. The message is loud and clear, that if you want to earn more, work less, and have an early retirement, then you’re required to start creating a stream of income that does not necessitates your direct participation. Whether you’re just starting a business, or you’ve been running it for a while, the sooner you start thinking about how you are going to shift your business model to create passive income, the better it would be for you to achieve financial freedom.
The idea of passive income is a major paradigm shift for those of us who grew up with the traditional view of success like – go to school, get a job, get promotions, buy a house, contribute to a pension scheme, and finally retire at the age of 60. The problem with this traditional view is that time is traded for money, thereby limiting the amount of money a person can make by the amount of time he/she has.
The first paradigm shift involves a person’s perception of wealth. Most people see wealth in monetary terms, as they spend their whole life trying to achieve a big income because they think it will make them rich. Unfortunately, a big income is worth very little if the corresponding expenses are just as big as the income.
The new paradigm of wealth is not about how much money a person has, but how long that person could survive without working. If one person had $10,000 in savings and spent $5,000 per month, it would last for only two months. But, if that same person had $5,000 per month as passive income, it would theoretically last for the rest of his lifetime.
This is possible to achieve for any human being, but one must follow a disciplined approach not only in terms of savings and investments but even in controlling the wasteful expenditure.
Those who are in debt, the best way to build passive income is to first get rid of the permanent expenses. This means eliminating the debt that is taking your money each moment even while you sleep, including interest payments on credit cards, car loans, or any other debt one might have. Additionally, it also means scaling back the lifestyle so that one’s monthly expenses are brought to the minimum level.
Remember, with passive income, your money works for you, instead of you working for the money. The idea is to buy assets that produce a steady stream of cashflow, month after month, and that too with little or no maintenance. The holy grail of passive income is to create enough assets in order to produce an income stream that is greater than one’s usual expenses. At this point, time-freedom is achieved by a person. This means you are free to do anything you want with your time and your bills will still get paid automatically. So by taking a cue from the above text let us resolve to commence our journey towards creating “Passive Income” in order to make our tomorrow a better day.