What is a Passive Income
Passive Income passive income can be defined as ‘income that you don’t have to be present to earn’.
It’s regular earned income, that doesn’t require active (constant) involvement for it to earn you money. It can be thought of as any regular earnings from sources, other than those earned as an employee.
The difference between Passive income compared to other ways of making money such as side hustles, can be a little confusing.
Passive Income vs Side Hustle
Firstly, we want to point out that all income takes some degree of work for it to be successful. Although the lines can be blurred at times between these two methods of making money here’s how we can best explain them.
Author vs IT Expert example
An author writes a book and puts it on Amazon Kindle to sell. She has written her novel, designed it, and placed it on Amazon to sell digital copies. Customers can now make purchases of it day and night, 365 days a year without her having to sit at her desk watching and working. This is passive income.
An example could be a side hustle could be an IT expert guy who works at a local University during the day, but repairs or builds computers in his garage at night. This is a side hustle because the moment he stops working, his income stops. Compared to the authors income, hers will technically on forever without her further input.
Which is best?
In reality neither method is better than the other. Many people who have passive income revenue streams earn very little, compared with people who have hands on side hustles, especially when an idea has only just been launched or created.
An owner of the website may earn very little from putting ‘ads’ on their site, however this can change and evolve, as you’ll see from the next example.
Never heard of Facemash? Don’t worry, neither have most people.
The website known a Facemash permitted users to compare photos of each other and then decide which person was the hottest. We doubt it ever made any money, let alone passive income, until the creator, a chap called Mark Zuckerberg, changed it to a site that permitted more people and renamed it as ‘Facebook’… need we say more?
If Mark Zuckerberg had simply created and left Facemash alone, it probably would never have made him the billionaire he is today.
So what's the lesson?
The lesson tried to prove a point, that passive income can appear small, but overtime it can generate some enormous wealth, especially if you do as Mark Zuckerburg did which was to create something, then improve it.
As previously stated, Passive income has the ‘potential’ to make you money, 365 days a year, morning, noon and night.
Will it help your finances out immediatly? Doubtful, hence why we at Quidearner have a different opinion on this pathway which is…
Generate both methods of income
One of the hardest things to do when it comes to generating a passive income, is to make a physical start. Making a solid no-excuses commitment to dedicating time, learning and possibly some money to generate your own methods of passive income is the hardest part. Once you’ve accomplished this step, the battle is half won.
When you have committed yourself to generating a cash generating passive income, the next step is to decide how you proceed and plan your attack.
Popular methods of generating passive income
Passive Income Ideas
So what are the best ways of generating passive income?
Stocks and Shares are close to the top in terms of how people generate excellent passive income. It’s not exciting, in-fact it can be quite a boring way to riches, but if you invest in the right company, it can make you very wealthy.
Warren Buffett is probably the worlds most successful investor in stocks and shares. His career has spanned a lifetime of making sensible investment choices, buying stocks for a good price at the right time. His company Berkshire Hathaway’s profits in 2018 was $4bn (billion dollars) and it’s assets were worth $707bn!
It’s hard to conceive that he started investing when age 11, and he was rejected into Harvard Business School.
The subject of stocks and shares is not for the faint hearted. You can lose money but you can also make a lot in return. The more you learn about the stock market, the better equipped you will be to make money.
Property has made some people within the UK extremely wealthy. After all, when was the last time your landlord reduced your rent because house prices dropped in value?… the answer is never.
Like with investing in stocks and shares, property is a long term game, but the chances of you making money from renting out a property or selling one, are extremely high. Yes times have changed, for example it’s harder to borrow from the banks to take out ‘buy-to-rent mortgages, but many lenders still offer these services. Entrepreneurs are developing ingenious methods of borrowing deposits, or sometimes not even using them at all to get their businesses up and running.
See Quidearners section on Investing, which covers Stocks & Shares, Property and other tangible assets to learn more about this topic.
Important Advice and Tips
So what are the best ways of generating passive income?
Popular Passive Income Methods to Try in 2020
Nibble is a financial platform that helps investors and lenders, who provide alternative loans, to cooperate. Nibble is owned by IT Smart Finance, which has been creating and developing FinTech products since 2014. The priority areas of the holding’s work are the usage and analysis of big data.
Nibble guarantees investment security, as loans are issued by companies within IT Smart Finance holding.
The average revenue of Nibble reaches 12% per annum, which is higher than the average revenue on the alternative lending market.
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