One of the easiest and surest ways to become rich is to find a way to generate passive income. Passive income is what makes the rich wealthy. The best best passive income investments include real estate, dividend stocks, writing a book, etc. So if your goal is to become rich, you may want to sit down with a financial advisor to figure out which passive investing strategies to pursue.
What is passive income?
In a nutshell, passive income is money you receive while not actively working for it. For example, interest earned from a high yield savings account or a rental property is passive income. Whereas income earned from working for someone else is active income, because you trade your time to get paid.
Passive income can make you rich, simply because there is no cap on how much money you can make; sky is the limit. Whereas when you work for someone, earning active income, your boss determines your salary. In other words, with passive income, you generate cash regularly by making your money work for you instead of you having to sell your labor.
Why is passive income so attractive?
Passive income is more attractive than active income, because there is only 24 hours in a day and you end up running out of time.
The rich values their time so they want their money to be generated from passive income investments.
So passive income, not active income, can make you rich. Unless you’re a CEO of a major corporation, a surgeon or a lawyer, becoming rich by only earning active income is likely impossible. If your general goal is to generate enough passive income so you can become rich, keep on reading.
Moreover, passive income is more attractive than active income because when you retire, or if you are unable to work due an illness or something, your active income ceases to exist. So you’ll need to rely on your passive income.
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Passive income is better for tax purposes.
One way to get rich is to make sure that you keep as much money as possible. Passive income is taxed differently and more favorably than active income.
Two main ways to get rich with passive income investments:
There are two types of passive income investments that you can pursue today to get rich. Which one you choose to pursue depends on your preference, skills and talents. The first one is passive income that requires money to start with, maintain and grow. The second one is passive income that requires little to no money to start with, grow, and maintain.
Passive income investments that require capital to start:
Passive income investments that require some type of capital to start with have the most potential to make you rich. A good example is rent from real estate property investments. In fact, most millionaires and billionaires have built their wealth through real estate.
However, this type of passive income stream requires you to take a mortgage to buy rental houses or apartment building. The loan you take to purchase your rental properties can turn into a large cash flow stream. However, it is not without risk because in a falling market, expenses and regular payments can drive you to bankruptcy if you’re not careful.
A mortgage loan can be used to purchase a real estate investment property. Check out rates today.
Another example is passive income in the form of dividends received from stocks, REITs, mutual funds, etc… Dividend stocks are by far the best passive income investments one can have because you literally get paid to own them. For these types of passive income, you will also need capital to purchase those stocks and it might take some time to reap the benefits, but it is the surest path to becoming rich based on the historical performance of stocks.
Another way to generate passive income is to invest in a business by becoming a silent partner. When you’re a silent partner, you aren’t involved in the management of the company; you just sit back and collect the profits.
Passive income investments that do not require capital to start:
The second class of passive income investments that require little to no capital, include writing a book, creating a blog, a patent, trademark, a business, etc…These assets can turn into huge profits. However, these passive income investments require upfront time. You’ll work a lot in the beginning. But the profits are endless. So building a passive income portfolio is one of the surest way to get rich.
The bottom line is in order to become rich, you need to learn how to generate passive income. Whether it’s creating or acquire a business, invest in real estate properties, or write a book, you need to start now. That is the key. You simply cannot become wealthy simply by relying upon your work (your 9 to 5 job) to generate income.
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