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“Don’t let making a living prevent you from making a life” John Wooden

If you’re an employee or self-employed individual, you may very well understand the concept “time is money. You have to be present and spend some amount of time on your work or you will see no income at all.


What if I told you that you could be making money right now as you’re reading this article, while you’re out for coffee, or even while you’re sleeping!


This isn’t as farfetched as it sounds, and may even be your ticket to more freedom through both time and money. Sounds exciting, doesn’t it?


That’s where passive income comes in.


Passive income has to be one of the most delightful ways to make money. In this post, we’ll be defining what passive income is, the types of passive income, and how it can change your life and perspective on income as a whole.


What Is Passive Income?


Passive income is a steady flow of income without the need for putting in a considerable amount of effort or the daily commitment to a full-time job.

Passive income can come from rental properties, ownership of a business, investments, side hustles, and selling products instead of services.


The idea is to get your money and your assets working for YOU. The primary goal of passive income is to make money while you sleep. You will invest time building upfront to generate income down the road with little to no activity on your behalf.

You accrue passive income by investing in products that produce dividend income or interest income and values that appreciate over time.


Why Is Passive Income Important?


I’ll list 5 reasons making passive income can change your life by letting you live your life.


You can pursue the things you love instead of just doing what pays the bills.


If you’ve got something you’re passionate about in your life, odds are you’ve had to put off doing what you want to do so you can do what you need to do. Sure, you gotta do what you gotta do, but do you wanna look back on your life to see that you barely lived it at all?


Passive income gives you freedom to do more of the things you love and exit the proverbial 9 to 5 rat race that most “normal people” are subject to.

Passive income gives you the ability to live and work from anywhere.


If you want to use your cellphone but the battery is low, you’re forced to sit next to the plug in the wall while it charges. Like a leash.


Similarly, if you find yourself wanting to travel or live elsewhere, you have to consider your job, your vacation time, and entertainment costs.

With passive income, you’re not restricted to a city or location. This allows you to live or travel at will without being concerned about the week or two of vacation a year your job makes you earn. You don’t have to worry about your state of bliss coming and going too quickly, which can be pretty painful sometimes.


Cut yourself loose!

Passive income provides a platform of stability and growth.


Many people believe that having a job means security.


This is not true.


Markets crash. You can be fired. You can get laid off. Companies also buy other companies and buildings all the time. Face it. Things happen. Relying on your 9 to 5 with your very life is unreasonable.


Passive income is the closest one can get to automatic income. You don’t need to worry about meeting your expenses at the end of the month by exchanging your direct time for money.


With so much time on your hands, you’re allowed the freedom to think and explore new ways to further strengthen your financial stability, and to grow it. It’s easier to train your focus on your finances when you’re not pulled in so many other directions. While problems can and still will arise in your life, financially and otherwise, you’ll be better prepared to deal with them.


It reduces your stress, anxiety, and fear of the future.

The pressure that comes along with an inability to pay your bills is a stress like none other.


These what-if scenarios begin to encircle your mind, causing anxiety, fear and an overall hopeless desperation for the future. This does a number on you mentally, physically and spiritually. It emotionally beats you up and destroys your hopes and aspirations. Not cool.


With passive income, your fears are put to rest because you aren’t worried about losing your job or falling victim to corporate downsizing. When you don’t have to worry so much about impending financial doom, not only do you feel better mentally and emotionally, but it translates into physical vitality. You have more energy and are more motivated to get out there and achieve more because passive income also helps to build that all-important financial momentum in life.

Passive income gives you the greatest value of them all — Time.


Money can be spent, made, lost, and collected. Time, however, can only be spent once and only once. This applies to the richest and the poorest. Time is the fairest currency. It’s our greatest asset. When you’re less shackled by the necessity to earn just to meet your monthly financial obligations, you have the freedom of time.


As long as you can ensure that your passive income outpaces your monthly expenses, you’re free to spend your time as you choose. When you have freedom of time because you’re not engaged in active-income work, you’re free to do as you please.


You have the freedom to do as you please because you have the freedom of time. That’s the power of passive income.


Types of Passive Income


Silent Partnership


Peer-to-peer lending or silent partnership can be different things depending on who you ask, but they’re in the same basket. Giving a loan, be it to family, friends, or a trusted partner or business you believe has the potential to generate future income. This can be promising if those you loan to can pay you back possibly with interest, but beware: No matter how large or small, investing in a single business is an inherently risky, long-term bet. Never invest more than you can afford to lose.


Rental Property


Rental properties are another way to earn passive income, though it requires a bit more attention. Long-term rentals can provide a reliable source of cash if they are located in a healthy market for renters, but they also carry long-term stressors like maintaining those properties, as well as paying multiple mortgages, property tax bills and other costs. Though you could focus on short-term rentals such as a room in your home or an Airbnb. Rental property as a whole is growing in popularity, but learn as much as you can before taking on such a venture.


High-yield savings accounts


High-yield accounts are a type of federally insured savings account that earns an interest rate that’s often much higher than the national average. For example, typical high-yield accounts are currently earning around 1.50% annual percentage yield, compared to the national savings average of 0.07% APY. Over time, those small differences add up to real cash, so it pays to shop around for where you put your savings.


Stocks, Bonds, and Dividends


Stocks and bonds is an umbrella term for a slew of investment types. Stocks, bonds, index funds, and dividends are all a category of their own. That being said, they follow the same rule. With stocks, similar to peer-to-peer lending, you invest in a company, like Amazon or Nike, and you get a piece of said company. When they make money, you make money proportionate to the percentage of the company you’ve purchased.


Dividends are payments you receive for owning part of a stock. This is similar to high-yield savings because for the amount you have invested in the company, you’re payed a percentage of your investment. Like interest.


Indexes, however, differ from stocks. This is because stocks are individual companies, like Apple or Disney. Indexes are a “pool” of stocks. The S&P 500 for example, is a stock market index tracking the performance of 500 large companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices.


Apple, Amazon, Facebook, and Tesla, to name a few, are all part of the S&P 500.

So if you’d rather not invest in the chances of an individual companies success, you may purchase an index, which is part of the economy as a whole.


Closing


Now that you have a better understanding of passive income. You can begin your journey to financial freedom. Not only financial freedom, but time, which is priceless.

Please shoot us an email if you have any questions or comments. Also, check out our collection of ebooks on online income, passive income, debt management, and more!

“The Wealth Garden was created in the hope that we can free people from the ties that bind them, and bring them closer to the things that bring them joy in life. Thank you for reading!” Jarkerrian Richardson, Wealth Garden CEO