"We all have a choice to spend today, or save up and be able to consume more in the future."
Do you know why the statement struck a chord with me? Because many of us live for today and what today can fetch us. Permit me to say, tomorrow never ends so long as we're breathing and living. If you're single, you'll one day get married, if you're married you'll have children and if you have children, they'll attend school...it goes on and on and on. So there's a lot more to live for than today.
While prospecting someone the other day, he said something that really got me thinking on different types of incomes and I want to dedicate this very post to passive income.
Do you know why the statement struck a chord with me? Because many of us live for today and what today can fetch us. Permit me to say, tomorrow never ends so long as we're breathing and living. If you're single, you'll one day get married, if you're married you'll have children and if you have children, they'll attend school...it goes on and on and on. So there's a lot more to live for than today.
While prospecting someone the other day, he said something that really got me thinking on different types of incomes and I want to dedicate this very post to passive income.
What is Passive Income?
The salary you get from work is as a direct result of your efforts at work. Passive income, on the other hand, generally includes income that is not directly related to your daily activity and which you can generate without having to actively work for it; in fact it is the other way round, your money is actually working for you with no extra effort on your part apart from the act of investing.
Passive Income in Retirement
If you are middle aged, your goal should be to use as much of your income as possible from your remaining peak earning years to create a source of passive income, which is often the only source of funds for most people during retirement. It is particularly important to create sources of passive income that will generate regular income for you in retirement or should you be unable to work for a period of time. Here are some of the most common sources of passive income:
- Buying to let
You can buy a residential or commercial property for investment purposes and rent it out to create rental income. In Nigeria where rental income is earned often two or three years in advance, landlords have a huge opportunity to invest the windfall payment derived from one property to invest in another. This can be a great investment for the long term, but usually requires significant capital.
- Dividend yielding stocks
One of the easiest ways to earn passive income is to buy shares in a publicly quoted company that regularly pays dividends to its shareholders. If you don’t have time of the inclination to carefully select stocks yourself, contact a reputable stockbroker and educate yourself on the workings of the stock market. There is a plethora of information online, in books, magazines and the media on how to invest in stocks. In the alternative you might prefer to purchase mutual funds as a good way to build a well diversified and professionally managed portfolio even if you don’t have enough money to buy individual stock. Both stock and real estate have the ability to grow in value over time.
Indeed, capital appreciation is one of the greatest benefits of both of these passive income sources when you sell your asset. These proceeds can then be used to create other assets. In discussing the advantages of investing in these sources of passive income, one should never ignore the ensuing risk. Bear in mind that there is the very real risk of loss as markets can be volatile and prices can go up and down. As experienced in the global meltdown of 2008, that is still very fresh in the memories of many investors.
Indeed, capital appreciation is one of the greatest benefits of both of these passive income sources when you sell your asset. These proceeds can then be used to create other assets. In discussing the advantages of investing in these sources of passive income, one should never ignore the ensuing risk. Bear in mind that there is the very real risk of loss as markets can be volatile and prices can go up and down. As experienced in the global meltdown of 2008, that is still very fresh in the memories of many investors.
- Interest Income
Interest is a most basic form of passive income. This recurring income stream can help finance some of your current needs, or be saved for other goals. Interest earned on savings account balance, fixed deposits, or bonds as a risk-free source of passive income. However, do note that with current interest rates hardly keeping apace with inflation, it will be difficult for you to grow your capital in this way.
- Invest in a Business
There are many interesting business opportunities that struggle to attract adequate funding. If you are approached by a well regarded entrepreneur to lend money or invest in their business, and are interested in providing some support, have the proposal properly analyzed by a professional before you consider lending some of those needed funds or become a silent equity partner to the business entitled to dividends should the business meet expectations. Try to envision the type of life that you want in the future. What do you want to spend your time doing? What type of house do you want to live in? It is important to ask yourself these questions.
To many of us, as we enjoy one primary source of income from one primary source of income from our jobs and occupations, we can become somewhat complacent. Yet it is very rare to find people achieving their financial goals from their salaries alone; one usually needs alternative sources of income to be able to increase one’s wealth in any significant way. We all have a choice as to whether to spend today or save up to be able to consume more in the future. It will not be easy and of course the state of your personal finances, family situation and lifestyle will determine how much you can afford to put away each month.
The usual pulls on your income and the temptation to be lured by peer pressure to spend will continue. It is only through discipline and consistency that you can commit to saving something, no matter how small, each month. Through the power of compounding, even small savings today can grow into significant sums in a few years. Start building passive income today. My name is Olumide Ogungbemi, my numbers 07056989820 and 07033588160 and I'm available to answer all you questions regarding savings and investment.
The usual pulls on your income and the temptation to be lured by peer pressure to spend will continue. It is only through discipline and consistency that you can commit to saving something, no matter how small, each month. Through the power of compounding, even small savings today can grow into significant sums in a few years. Start building passive income today. My name is Olumide Ogungbemi, my numbers 07056989820 and 07033588160 and I'm available to answer all you questions regarding savings and investment.
