Passive income is something many investors and businesses around the world are looking towards to help them in reaching financial success. The average person doesn’t realize the power that passive income can do for you to helping you reaching financial independence. Passive income is defined as money that consistently comes in without you having to physically work for it. An example of this would be if I own an apartment complex building of six units, and the rent on each unit was $700 a month. If I have six tenants living in those buildings and paying me on time each month, I am making $4,200 a month in passive income. That means in a year I am making $50,400 in passive income. Essentially passive income is defined as money generated on autopilot.
As a student of finance I seek to obtain passive income through many different means. Real-estate, Dividend yields, and Interest payments are some of the ways people obtain passive income. While these methods are often the classic way to obtain passive income, it’s not very realistic for poor and middle class Americans as these investments cost quite a bit of money. For a person to go out and buy an apartment complex, it would cost hundreds of thousands, if not millions of dollars in startup capital. Dividend yields and interest payments are something we can all get into. The problem with this idea is that to make any real money with interest or dividend yields you have to have hundreds of thousands to millions of dollars. The reason for this is that if you take dividend yields as an example. Say you pay $10 for a stock that has a dividend payment of 10% per quarter. If you have 100 shares of that stock you are only making $100 each quarter. But if you hold 100,000 shares of a stock you will see $100,000 each quarter. So if you want to be making 6 figures a quarter a person would have to spend a million dollars to buy enough shares to be able to have a strategy like this to work successfully.
While the methods I just mentioned are in a way off limits to much of the public, there are many ways people who do not have a lot of money can create passive income. Vending machines, Websites, and other businesses are how many people who are at the lower levels of the income brackets are building a consistent stream of income without a lot of money. An example of this is when I was starting out a few years ago and wanted to build passive income I looked towards the internet. I taught myself how to build websites and then get people to visit my websites by marketing them over the internet. Over time I became very good and built a niche passive income of websites. I used Google AdSense as a main focus of bringing in money every month. After I built these websites I could leave them to be and collect pay checks every month from Google passively. Because of the fact that I was able to manage my time so well I was able to move on to other projects for me to make money with while I have the financial security of knowing I don’t have to go work a 9-5 job to pay for me to live.
When it comes to passive income, having the financial security of knowing I don’t have to go and work, while having more time to create more passive income to increase my wealth is how the rich get richer. The key to all this is time management and looking at time as an asset. Everybody no matter how much money they have is only afforded 24 hours. Because of this there is only so much I can do with so few hours. Building assets that work for you, without having to lift a finger is the dream of any investor. That’s why if you are unsure about how you should go about trying to become wealthy you should ask yourself the following questions. Look at the few factors I just mentioned when picturing how you will obtain your wealth. Think about how time is an asset and there is only so much we can do in a day. Think about if you want to work for a living, or have your income automated so you can have more time for the things you want in life. Ask yourself “how I will go about executing this plan in order to reach massive amounts of passive income”? Will I buy some apartment complex buildings, or will I build an army of website and monetize them? If you want to become successful in finance, every person must answer these questions, and build a plan of action around what they want to do in order to execute their dreams.