One of many worthwhile reasons of being self-employed is that it uncovers the opportunity for generating passive (or residual) income. As the name implies, this is income that is generated without you having to do any work after the original set-up. As opposed to trading hours for income, you do some work up-front to create a passive income system and then let it operate on cruise control. Your system expands your bank account without you having to think about it, and you can go on to assembling the next residual income system.
Passive income is powerful. This is how people get rich. It's not a get-rich-quick scheme, but with enough time and hard work you can construct increasingly more passive income systems and grow wealth. The subsequent paragraphs summarize a few methods of earning residual income.
Real estate investment is a well-known form of residual income. Real estate can be a risky or dangerous investment, as plenty of investors learned when the housing bubble broke a short time ago. But if you are cautious and play the market effectively, you can profit from the real estate market. You can buy inexpensive properties, hire contractors to enhance them, and then sell them to earn a gain (just ensure you can afford to retain the properties long-term if they fail to sell). Or you can lease your properties and employ a property manager to do the landlord duties (such as unclogging toilets). In either case, if you make investments in the right buildings you can earn profit with relatively little work on your part.
Stocks, bonds, mutual funds, and other investments are all kinds of passive income. If you place money into the stock exchange, it is not certain to grow in worth. Over the course of several years or decades, however, it normally does. For a few of these investments, such as mutual funds, virtually all you have to do is put your money into the fund and a fund manager will handle it and ensure that it thrives. You normally must pay a service charge for this manager, but it’s worth the cost simply because your money is going to be thriving without you having to complete nearly anything.
Even a common savings account at a neighborhood bank is a form of residual income. All you must do is start an account and keep money in it. It’s that simple! Your capital will grow repeatedly as it earns dividends.
You can start and build businesses and permit somebody else run the daily procedures. You still personally own the business enterprise and end up getting all the profits, however you rarely have a need to worry about it since it is being governed by someone else. Or you might construct an online enterprise that works largely on cruise control, with only a few hours from time to time to ensure that it stays operating smoothly.
Earnings from intellectual property is one more well-known type of residual income. Patents, stories, songs, software applications, and other kinds of intellectual property could possibly earn you royalties when people purchase or utilize your works. In recent years, numerous people have been creating information products to put up for sale on the internet and building inexpensive video games for Apple iPhones and Google Android devices.
Any other thing that appreciates with time, including collectibles or exceptional gold and silver coins, could be regarded as a form of passive income. Use caution, though; you have to ensure there exists a market for your valuables. If you own a collection of priceless goods, but nobody wants to purchase them, they are basically worth little or nothing. Valuables are only really worth what people are prepared to pay for them.
These approaches are the most common strategies for earning passive income, but the topic is way too substantial for me to encapsulate every aspect in a single write-up. In reality, there are several entire publications and blogs devoted to generating residual income. I strongly recommend looking at The 4-Hour Workweek, Rich Dad Poor Dad, and The Smart Passive Income Blog for more tips concerning passive income.
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