Do you know the types of income? Do you know what they are? passive income and how to generate them? In this article we show you everything you need to know about passive income.
Passive Income
There are, roughly, two fundamental types of economic income, assets and liabilities. Each type of income has its own characteristics along with its advantages and disadvantages.
Before I start talking about the passive income, we will start with the most famous and traditional income, the assets. The active income are those profits that we obtain due to a product or a service that we are offering; We all know the traditional ways of working.
Currently, more than 75% of the young and adult population generate income solely from trades and jobs based on an active modality. Active income works as a constant exchange, that is, you are constantly giving something and, consequently, you get remuneration in return.
From the active income, for the delivery of your time, your effort or your products, people pay you on a regular basis or each time you obtain a certain result. And, taking this into consideration, active income can be classified into two types:
Types of active income
Time or salary income: these incomes are characterized by being the permanent jobs that we know very well. People are usually in positions with certain functions and responsibilities in some institution.
In this type of income, people receive a payment not necessarily based on effort but for your services over time, generally every fortnight or monthly.
Income by products or results: This form of income does not work for the time in which you work but for the products or results you offer.
In this type of income, you find profits from projects or products that you create for clients regardless of how long it took you to do it. You charge for the result, not for the time you have worked.
Generally, when receiving income only from an active modality, there are several disadvantages. The first of the disadvantages of active income is that they generate fixed payments. Whether by salary or product, remuneration almost always remains at a fixed value and changing it is usually complicated.
Disadvantages of Active Income
On the other hand, as we mentioned at the beginning, remuneration is only possible through an exchange, whether of time or effort. This means that active income greatly consumes your energy and time, often preventing you from dedicating yourself to other projects.
Last but not least, active income only generates a single form of remuneration, therefore, only by active modality it is very difficult to generate more than one form of income. This is a problem because a salary or a project payment never reflects the actual profit you will have. All necessary monthly expenses must be deducted from this profit, therefore, your real profits are reduced.
What is passive income?
Now, after this introduction to the world of income, we will proceed to explain what passive income is. Passive income, as its name indicates, is income that is generated constantly, or passively, over time.
These income, in contrast to the assets, do not imply a constant exchange to generate an economic remuneration. That is to say, although an investment of time or money is necessary at the beginning, once the product is finished it will begin to generate money on its own even long after it has been completed.
Passive income is characterized in that you do not need to be actively or in person with the project for it to generate money. This modality is equivalent to planting a tree: Although at first it requires care and a lot of attention, once it is developed it will bear fruit even when you are not present.
Financial Freedom
Have you ever dreamed of being able to have slack when it comes to paying bills or having savings? Financial freedom is an economic aspect that all people hope to have at some point in their lives.
The feeling of not being tied to a paycheck or the ability to stop working at some point without losing earnings is a growing need for most people. Passive income is the easiest way to achieve much-needed financial freedom.
Although passive income is not everything at the beginning, it is always a great option in the long term since, as time goes by, the benefits will increase. Passive income initially generates new ways of income through which you can support yourself when making payments if you have a physical job or if you are an independent worker.
However, with enough care and attention, that little passive income support can become your main source of income. The key to generating passive income is not to find a perfect project to generate money for the rest of your life since it is possible that it will fail.
The key is to have at least two or three which you can develop and, in the event that one fails, do not lose great progress or return to the starting point, support is a word that very accurately defines the nature of passive income .
on autopilot
Another of the great advantages of passive income is the “automated” nature that they possess. That is, when forming a project to generate this type of income, it will certainly require some preparation at the beginning but, once finished, you will be ready to generate income on your own.
Passive income usually makes money automatically without the need for you to constantly monitor it like a person.
Most passive income is made through the internet without this really being a problem for the person. Through automated platforms and payment systems, it is possible to generate income that will go directly to your accounts while you dedicate yourself to other activities or projects.
Comprehensive investments
Passive income generally requires an investment, sometimes capital, but in all cases it requires dedication, attention and time. However, like any investment, this generates long-term results and, in the case of passive income, it is comprehensive results.
By comprehensive results, we mean that you will not only see financial compensation due, but there will also be a reward in terms of time and energy.
As we discussed in the previous two points, passive income allows you to have financial freedom, but, at the same time, it allows you to start generating full freedom. Due to the automatic nature of this income, once you begin to receive results from your projects, this will allow you to dedicate yourself to more activities than just your work.
From spending more time with your family, taking trips or even generating new projects, passive income gives you the opportunity to decide what you want to do with your time. Have you ever wondered how some people can travel the world without working? Most of the people who are dedicated to traveling the world and getting to know it obtain their income through passive ways; In this way, they dedicate themselves to living their lives the way they would like while continuing to earn money from their work.
Passive Income Myths
Some people, when hearing about passive income, tend to present certain perceptions that are not entirely correct; The first and the most heard is that it is impossible to earn money without working. Passive income does require work and effort before starting to generate profits, only that, unlike traditional work, passive income, in the future, will only require certain maintenance or support to continue generating money.
By contrast, we can also find people who believe that generating an income is something that can be done from one week to the next. Passive income requires time and attention, there is no specific time set in which you should start seeing profits.
Not having a pre-designed time frame means that building a stable passive income stream can take several months, as well as a few years. However, as we mentioned before, passive income generates results in both money and time and energy.
Finally, another of the great myths that surrounds this topic is to think that generating passive income is only possible for rich people or those who have a large amount of capital to invest. Although it is clear that, in some cases, an economic investment is necessary to generate passive income, it is not a high investment at all; Similarly, many ways to obtain passive income do not require an investment other than the time and effort that you can dedicate to them.
Best ways to generate passive income
Now that you know what passive income is, how it works, and its benefits, below we will show you the most famous ways to generate them through the internet, to help you generate passive income:
Create your own blog
Do you like to write or do you feel you have the ability to do so? Then it may be a good idea to make a blog. Blogs are web pages dedicated to the writing of thematic articles uploaded on a recurring basis. Blogs exist everywhere, there are blogs about medicine, about gastronomy, education and even blogs about entertainment, humor or travel diaries; it is possible to write about anything in the world and, thanks to globalization and the connection we have through the internet, it is very likely that there will be people interested in reading what you write.
The way to generate income in this way lies in the monetization of your page through an advertising system, that is, through systems such as TheMonerTizer or Google AdSense it is possible to place advertising on your blog that will later translate into profits for you. It will depend on the system you work with, but, in general, the system will pay you for the traffic on your website or the people who click on the ads.
Blogging is a great tool to earn money while doing something you enjoy, like writing. Although at first it is difficult for you to perceive profits, once you manage aspects such as SEO, your page will begin to receive more and more visits that you can then monetize.
write your own book
Do you like to write, but the idea of the blog does not convince you? Have you ever dreamed of writing a book? If you have answered yes to these questions then the best option for you is to write an e-book. An e-book is a book in virtual format that can be sold through virtual stores or digital libraries.
For each person who buys your book in one of these virtual stores, you will receive a commission from that sale. Therefore, you only take care of creating one or as many books as you want and then the stores where you publish it will offer it in their catalogs for sale.
One of the most famous platforms to publish a book online is Amazon, and it is completely free. Through the Kindle Direct Publishing system you can sell your books on the Amazon platform in virtual or physical paperback format and receive up to 70% commission for each sale.
Run a virtual store in dropshipping mode
Have you ever thought about having a store without having to worry about inventory? Dropshipping is a new type of virtual store that is becoming a trend throughout the world due to the practicality it implies. Dropshipping is the best way to run an online store without having to manage tedious inventory or worry about shipping.
Through this modality you find a distributor or manufacturer and associate with him to sell his products through a virtual store or website of your property while he is in charge of managing the inventory and shipments. You place the platform and the manufacturer takes care of producing and shipping.
The commissions received from dropshipping are variable and depend on the manufacturer with which you work, but through this form the income is completely passive. There may be some problems with shipments or with the existence of products in the inventory but usually it will only take a few calls with the manufacturer to resolve the problem.
Sell products in Affiliate Marketing
Affiliate marketing is one of the best known ways to generate constant passive income. Through this method you generate income due to the sales of third-party products that you publish on your website. The main thing is to get product links through systems like Amazon Affiliates or Shareasale, then you take these links and publish them on your website.
The best way is through articles promoting the product or comparisons between 2 or more different articles. Now, for each person who enters the links you publish and buys the product, they will give you a commission on the sale received.
This method combines the best of blog writing with product sales and can generate high passive income for you in the medium and long term. However, the competition is growing every day as more people opt for this model and it is necessary to have a little experience before starting to generate profits.
If you want some ideas on how to make passive income in 2020, we invite you to watch the following video:
Create a channel on Youtube
Another of the most common ways to generate passive income is through platforms such as YouTube. YouTube is one of the most famous video playback platforms in the world and is currently one of the companies with the largest number of advertisers in the world. Through this platform you can upload the content that you like the most, from compilations, games, art, movies or even tutorials of all kinds, there are countless topics to cover.
It is necessary to reach a certain number of visits and subscriptions before you can start monetizing, therefore, it requires perseverance and dedication. However, once you get it, Youtube will pay you for the ads that are shown in each of the videos on your channel; Although it is a method that takes time, more and more people have made YouTube their main source of passive income while doing what they like best.
We hope you have enjoyed this article on passive income, if you want to read other content similar to this, we invite you to visit the following: Financial plan of a company Steps to do it!.