Most millionaires understand the concept of looking for money. Every dollar made, to them is a tool to create more wealth. optimized. Millionaires optimize their earned dollars through passive means since they are fast and effective. Passive means are not for the chosen few, anyone can try them and succeed.
Let’s start by looking at the Difference between Active and Passive income
Active income involves being paid for the work you have done. There is a direct relationship between the work and the pay. If you are employed, you receive the pay for the work you have done. You are paid based on the output. You cannot be paid if you do not work.
Passive income is when there is no direct relationship between the work and the pay. Passive incomes require some commitment at the beginning, for which you are paid small amount, while much income come later. There is some work to be done at first before achieving a continuous flow of income.
Streams of Passive Income
The following are some of the streams of passive income.
Interest is one of the common passive incomes for millionaires. Itcan come from a variety of sources but the two biggest are from your interest-bearing deposit accounts (like a savings account) or loans, either to individuals (peer-to-peer lending or private notes) or companies (bonds, notes). Interest requires some little effort to earn any extra dollar. Once you save in a high yield savings account and leave the money for sometimes. The money will give you some return.
Dividends are payment made from investments. For a start, you may start investing in stock market. Later, you may get into partnerships which guarantee payment by the end of the trading period. The holy grail of dividends is qualified dividends because they’re taxed at long-term capital gains rates, which is usually much lower than your ordinary-income rate. Not all dividends are qualified and those that aren’t will be taxed like interest
3. Capital gain
This is the extra money you get from selling your assets which have appreciated. An appreciated asset is one with a higher market value than the book value. This could be stock, real assets or anything that appreciate its value over time. It is beneficial when you take advantage of those opportunities with low taxes. Long-term capital, that are held for more than a year are subject to lower tax rate compared to short-term capital gain.
4. Royalty income
This is the income earned when you allow others to use your property or borrow. If you are the author of the work, then you earn royalties for each sale made. You can also buy and license other people work and make money from every sale you make. Due to increased self-publishing and eBooks, people have created library of books which they sell on Amazon. Once your content hit amazon, it is easy to build your followers and every person looking for your work may find it there.
5. Business income
Most millionaires have business that they operate in order to diversify their income. Having a business, you can incorporate multiple streams of income. For example, if you are a blogger, you can be paid to create content. You can also be paid to teach others how to write contents. You can also be paid to sell digital courses online. Affiliate sales can also earn you some income by incorporating affiliate link in your content. Millionaires grow their business during their free time. If you own a business, some portion of your business income will be passive in the sense that you aren’t personally laboring to earn every dollar the business brings in. You are building something that generates income without active work, like a website or the sale of information products.
6. Rental income.
When you own real estate, you can earn rental income from individuals or companies who rent the space from you. This can be residential as well as commercial property, with different rules for both. An investor can own a fraction of the property with other investors and can rent it for income.
7. Income from employment
This is income from a contracted employment. Most millionaires use this kind of income to generate more income from productive projects. This is the kind of income that lay foundation to starters. If you want to be a beneficiary of multiple streams, then plan for the earned income. according to experts, you need save 10-20 percent of your net income every month. From the saving expand your means by starting a side business or career that generates more income for you. Any addition income made, invest in areas that generate passive income. the more income streams you create with your savings, the more secure you become financially.