For most of us the main source of income comes from our work, either as employees or self-employed if we are self-employed. This is what we call active income. They are not the only ones, along with these are passive income .
Although by definition they are quite different, they are not antagonists. Passive income coexists with assets, and in most cases they serve as a complement.
For all these reasons, knowing how to generate passive income and all its implications is important.
What is passive income
First of all, it is essential to know what passive income is . As its name indicates, they are those that are received on a recurring basis without devoting work or time, or that this is the minimum possible.
In this sense, the investment, whether economic, in work or time, is made at the beginning in the creation of the source of income, so that after its implementation, its intervention is minimal.
This definition determines that the sources of passive income are multiple and very varied.
So are your goals:
- Have one more source of income for day to day .
- Get to cover contingencies.
- Encourage long-term savings .
Whatever the goal, having sources of passive income has an impact on the financial health of the consumer. And what is increasingly important, thanks essentially to digitization, a democratization is taking place in the generation of passive income.
Passive Income Examples
Passive income is therefore an additional source of money, which will depend on many factors, both personal and professional .
Thus, in the former, the possession of certain goods makes it possible to obtain this income, and in the professionals, which are increasingly on the rise, it is to have certain knowledge.
For all these reasons, it is essential to evaluate all these factors beforehand to see what type of passive income we can opt for.
real estate income
Renting a property is one of the most traditional passive incomes but it has also changed over time.
Thus, although long-term rentals of flats and houses are maintained, other figures are growing enormously, as is the case of vacation rentals for shorter periods favored by the rise of online platforms that advertise this possibility.
Savings and investment
It is another of the most classic forms. Leaving money on deposit or collecting stock dividends generates recurring passive income .
With all this, it must be taken into account that not all investment is passive income , only the one that generates periodic benefits is, if it is invested exclusively thinking of obtaining a capital gain, as occurs with cryptocurrencies , for example, it will be necessary to make a continuous investment , buying and selling, to generate this income.
Sale of second-hand products
Another of the most used ways to get passive income is the sale of second-hand products of all kinds. Its growth is being very important for different reasons.
First of all, because it is easier. Thanks to the rise of different Internet platforms and mobile applications, millions of sellers can be easily connected and thus facilitate the sale of all kinds of products.
The second is the environmental commitment. The reuse of products, giving them a second life, is an upward trend that has made the purchase of clothing, footwear or furniture grow, for example. To all this we must not forget other more traditional forms such as collections or old or discontinued books among many others.
Creating any type of content: written, oral or audiovisual generates work, but once it is done it can become an ongoing source of income.
Likewise, digitization has multiplied the options. If we start with the most classic, writing a book , the possibilities of self-publishing are greater, especially if it is done in electronic format or e-book. Another way to earn income from written content is on blogs, many of which are highly successful and have thousands of followers.
Audiovisual content is another of the most successful, with podcasts or videos on channels such as YouTube or Vimeo in which content can be monetized.
Even works of art or any collectible object can multiply the income thanks to NFTs .
Intermediaries in buying and selling
Although it seems like an active activity, the truth is that there are many ways to do it and generate passive income . One of these is dropshipping , websites that allow you to sell third-party products acting as intermediaries.
In this case, you have to buy the product and sell it, although it is not necessary to have storage, but there are other online ways that are even simpler. Affiliate marketing or creating web pages that describe and compare third-party products to encourage their sale in exchange for a commission is also becoming more frequent.
How to manage passive income
As you can see in all these examples the possibilities are many and also the differences.
In some, a significant initial effort may be necessary, to accumulate significant wealth, such as when buying a property to rent, to obtain this income.
On the contrary, in other passive income ideas, such an important “investment” is not needed, but greater perseverance is needed to achieve it. If you are going to make a YouTube channel, for example, it will most likely take a while to achieve adequate profits.
In short, you should avoid confusing passive income with easy money , it requires effort, before or during its management, and in many of knowledge, but thanks to this the family economy can achieve relevant profits.
The taxation of passive income
Finally, an important point is that passive income must be taxed, pay taxes.
The problem is that with sources of passive income so varied, so is their taxation, so we can distinguish:
- Movable capital income that is taxed in the income statement, such as interest on accounts and dividends.
- Income from rental of habitual residence as income from real estate capital also in personal income tax.
- As an economic activity , which includes a large number of passive income, from vacation rentals , commissions for recommendations or content advertising.
As you can see, there are many ways to get passive income, many available to everyone, always with the necessary dedication.
For all these reasons, if you want to get extra money or have your relatives do it, do not forget to share this post. Whether it’s for contingencies, or to get savings, always having a higher income helps to have more balanced personal finances.