In the modern age, people are finding all kinds of ways to save money and increase their earnings from home. One of the ways that people can do this is by creating passive income streams. Passive income streams are unearned income from a source other than a job. Some examples of passive income streams are investments, real estate and rental properties, and stock market investments. All of these are great examples of passive income. In the long term, this can create more robust savings opportunities for retirement or other financial goals that might be tough to meet with today’s salary trends. We spoke to a handful of industry leaders about how passive income can create sustainable wealth, keep reading to find out what they had to say!
Passive Income On Top of Your Job
Passive income can help you build wealth by giving you more control over your finances. “Even as an employee of a company, there are many aspects of our futures that are out of our control. When your future employment is tied to someone else’s decision, you lack control of your financial future. Building passive income along with active income from a salary or paycheck can help you save valuable dollars for your future retirement and help you feel more secure in the long run,” said Datha Santomieri, Co-Founder and Vice-President of Steadily.
Remember that to be most effective, passive income should be additional money on top of your regular paycheck. “It’s important to understand that passive and active income should be working together to be the most effective. If you only have one stream or source of income, it won’t set you up for the same kinds of savings as you’d get with both passive lines of income and income from an employer. It’s important to build both so you can set yourself up for early retirement and fewer financial stresses along the way,” said Tony Chan, CEO and Co-founder of CloudForecast.
More Flexibility
Additional streams of income means more flexibility with your life in general. “Passive income is going to allow you more flexibility to live your life the way you want to. Especially for those that are hourly employees or freelancers, it can take a toll to miss any days or need to take time off to recalibrate. With passive income, you aren’t necessarily reliant on your paychecks and can make more effective choices about when and who you work for,” said George Fraguio, Vice President of Bridge Lending of Vaster.
It also allows you to divide your finances more easily and use your salary to pay basic expenses. “Passive income allows for more flexibility with your finances. If you have active income from a salary, you can use that to meet your basic living expenses while using passive income to save for bigger expenses or investments so that the money can grow as you’re making it. This kind of strategy is what builds sustainable, generational wealth,” said Tom Mohr, Author and Singer-Songwriter at CEOQuest.
Safety Net
Passive income has its benefits on our mental state as well. It can help us live a stress free life without worrying about our finances as much. “Mentally, passive income is extremely helpful because it ensures that you have something of a safety net in the case that you need to search for another job. It’s not just about building wealth, although that’s a great benefit of it too. It’s about setting yourself up for a calmer walk through life by making sure that the basic needs for you and your family can be met at all times,” said John Berry, CEO and Managing Partner at Berry Law. Having a safety net is essential for moving through the job market, you don’t want to get caught in a mass layoff from a company without having some kind of income to support you when it’s time to search for a new job.
Meet Your Financial Goals and Live Where You Want
Passive income can help you reach your retirement goals early, and possibly even exceed them! “Often, people’s goals with passive income are to save enough money to not only retire early, but retire comfortably. Even most standard retirement packages give just enough to make retirement a dream, but not quite enough to ensure that it will be a luxurious experience. Passive income can help you put savings away earlier and faster, getting you one step closer to enjoying the benefits of freedom and relaxation,” said Matt Miller, Founder & CEO of Embroker.
You’ll also have more flexibility to live in cheaper areas. “A big benefit of having passive income is both flexibility with your finances and in turn, flexibility with your location as well. The need to live in big cities is lessening in modern times with more people opting for passive lines of income and remote work so they can live in cheaper and possibly more desirable locations. Cheaper rent and lower cost of living means that with passive income, you can really build some wealth that will serve you in the long run,” said Chris Bridges, CEO of VITAL Card.
You’ll be able to diversify your savings and meet more of your goals. Instead of choosing one thing to save for each month, you could be saving for multiple goals a month and meeting those goals much sooner than you would otherwise. “Passive income allows you to allocate funds towards different savings goals. If you’re just relying on a salary, you’ll likely struggle to put real money away towards personal goals like buying a home or saving for a vacation. Passive income sources can make meeting those goals a lot easier, and in the best case scenario you’ll still have money left over!” said Jared Hines, Head of Operations at Acre Gold.
Examples of Passive Income
Some examples of passive income are income from investments or rental properties. Rental properties can be lucrative, but difficult to maintain in the long run. “Income from investments into property, businesses or the stock market can all be examples of passive income. These streams of income don’t necessarily replace a paycheck, but they can help sustain and fortify your income on top of what you make at your salary job,” said Lauren Singer of Package Free Shop.
Among those options, younger investors tend to trend towards the stock market. The stock market can be a great way to build your investment portfolio and start understanding the best ways to invest their money in different businesses. “Stock Market income is among the most popular of passive income streams, but can be the most difficult to predict and keep steady. If you’re already playing the stock market, consider getting the advice of experienced investors who have been active in recent years,” said Dan Lewis of Convoy.
Securing streams of passive income can help build wealth in a number of ways over time. It all depends on how you use it! With passive income on top of your salary, you could use it to match further retirement savings, save for a trip, a new car or any other large purchases you might need to make. These are the purchases that can be straining for people making competitive market salaries that aren’t quite matching up to inflation. In some ways, it’s necessary to seek passive income because many industries simply can’t pay up to the amount needed to both survive and save money. Many startups can offer decent baseline salaries, but those who want to increase their overall savings should seek out other forms of income such as investment in properties, investing in the stock market or investing in businesses. Having these streams of income will keep your finances secure and allow you to save for retirement or other savings goals faster and more efficiently.
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