You might think of “passive income” as a gimmick, complicated and risky investments, a very sophisticated strategy, or something that isn’t important to you, but you’re probably striving for it whether you realize it or not.
You do want to retire one day, don’t you? Even if you think you want to work forever, you’re probably saving for retirement anyway, right–just in case? “Retirement” is upheld as such a wonderful, ubiquitous goal because it’s equated with total fiancial freedom: you can quit your job and do whatever you want, be it start a business, spend time with family, travel the world, volunteer, or just hang out in your fishing boat for 6 hours a day.
But retirement is only possible when and if you have sufficient passive income. Maybe you don’t look at your 401k as a source of passive income, but that’s exactly what it is. You’re building up that asset until it’s large enough to provide you the income you need. Other typical sources of passive include pension plans, social security, and annuities, all of which are associated with retirement.
But who says you have to wait until your 65 to taste total financial freedom? Sure, you might not be able to access typical “retirement” passive income until you’re older, but why not build up some other income-generating assets in the meantime? You’ll either end up with a higher income later or acheive financial freedom sooner-or both!
Personally, I don’t feel comfortable relying solely on the stock market as my ultimate source of passive income, which is primarily what my retirement funds are invested in. I also have no pension and am not counting on much from social security. That’s why I plan to accumulate rental real estate properties as well, along with bonds (a great income source) which will also act as a reserve fund for that real estate. Other passive income sources can include distributions from your own business, ad revenue from a blog or website, or royalties from a book, song, dance, or other creative work.
Your alternative income sources don’t necessarily have to be 100% passive–maybe you like managing your own rental properties or writing your own blog posts. But once the assets are generating enough income, you can also choose to pay someone else to manage them–and then you’ll REALLY be free. You’re income will just keep rolling in no matter what you do.
Many people dismiss the concept of passive income because they associate it with risky investments, greed, the super-wealthy, or late-night infomercials. But in truth everyone needs and seeks passive income, and the sooner you understand and embrace the idea, the sooner you can acheive financial freedom.
More from Meg at The World of Wealth