Saturday, January 28, 2012

What is Passive Income?

In my country, people dream to have palm oil or rubber plantation. With so many plantations, they do not have to work hard again. However, it is not easy to build the plantation. You should work hard for upfront. Buying land is not cheap. You should also find the seed for the plantation.
A wrong plan could bankrupt the people. Some plantation owner loses because the pest or weather damages it.
The passive income must be suitable for the retiree. When the people cannot work hard again as they young, they still need money. They must need money though it is not much as young people.
Is the interest that we receive in Bank a passive income? No, it is different with passive income. The passive income is the income that you earned while you do not work hard.
 We can generate it from rental income or business income. Owning some properties can generate much passive income. You can rent your house to some people who need house. The tenant will pay you every month or year, depending of the contract. You do not have to work hard to generate money. Surely, you must work hard at upfront. It is not easy to buy the house. We should saving for it and needs dozen years to buy it. Sometimes, the house owner makes improvement for the house.
The upfront work for passive income must be harder than common income. Perhaps, you should work two times than working at the office. Some business man told that he worked for 24 hours for his business. He said he also work when he close the eyes.
 Sometimes, we also fail to generate the passive income. The business that we have found goes bankrupt. Perhaps we have made mistakes in business. We do not have to make the business analysis first or the disaster may damage our business. We can generate the income but loss some money. Creating passive income has risk too. Some businessman can generate the high revenue while some others loss.
After get streaming of income, you should work too though it is not hard as before. You still have to control the business. The decreases income may a sign that there is something wrong in the business. You may delegate people to improve the income stream. You may spend some money to add the capital or improve your asset. You should finish the problem or you will not receive the income again.

How to generate passive income
While a man sit on his house terrace, his money is increasing. He lift the cup to his mouth and his asset increases. Who does not want to be like the man? Most people dreams like the man.
You should not judge the man from his habit now. Ten year ago or twenty years ago, he was a hard worker. He works for dozen hours to collect some capital. He does not want to borrow the money at the bank or the brother. To him, He should work hard to generate money. If you want like the man who receives passive income, you can do like this:
1. Find jobs
To generate money, we have to work. Some jobs may give you much money but some other gives you little money. Find the jobs that fit with your skill or knowledge.
2. Due to difficult economic, you can also open a business. Start from small business. Do not let the economic make you mad without trying.
This business could be your passive income someday if you can manage the business well.
3. Invest your money at right place. You can invest at your friend business. Perhaps the business can generate money at the future. Surely, you should select the reliable friend or people.
If you have so much money, you can invest at stock. Stock can give you dividend. However, this option is not good option due to low stock return.
4. Buy the land
In underdeveloped country, only few people recognize stock company or bond. If they have excess money, they buy land, house, store, and other. They may use the asset but they often rent to others. With so many assets, they can generate money monthly.
The landlord often rent the crop to the farmer. The farmer shares the revenue to the landlord. It does not load the farmer. When the farmer fails to harvest the crop, they do not have to pay the rent.
5. Maintenance your asset
Even you have received stable revenue; it does not mean you ignore your asset or business. You should check the asset or business through your reliable people.
As the house owner, you should know whether there is a leak pipe or roof damages that can make your tenant unsatisfied. The tenant may leave with uncomfortable house and you loss your revenue.

Perhaps we should continue the above illustration. While he drinks coffee at the house terrace, the man watches the notebook. He read the report form his man. He satisfies that the revenue is good.

From what people get passive income
Some people can receive money without hard effort. They have work hard at the beginning and now they just receive their hard effort. The people who earn passive income usually make some stuff like these:
1. Book including e-book
Publisher will pay 10% of book price to the author. The author receives the royalty at the end of the month. Sometimes the publisher is late to pay the royalty. The amount royalty that you will receive based on your book sales. When the book is sold, you can generate so much money and reversely.
2. Software
Some programmer makes money by selling software. In my country, a boy can buy sophisticated sport car. He sells the software to the company. The software help people to get the cell phone voucher. He also offers the service to outside.
We know that some online businessman can generate million dollars. Let say, Mozilla FireFox and Winamp. This software is the most people used it.
3. New Technology
If you invent the new technology, you will get royalty. Alfred Nobel got royalty from his dynamite invention. Thomas Alva Edison generated money from light bulb.
If you are technician or architect who found new technology, you can generate so much money. Create a technology that is different from other people and it is useful for human. Mozilla offers new browser technology to surfer. We know Mozilla is easier to use than the previous internet explorer.

4. Rent the property
Build a flat and rent it to poor people. You can receive the money from there. In my country, a teacher has flat near the house. He can generate money while he is still working as teacher.

5. Stock Investment
Without working hard, you can generate money from capital market. Invest your money for blue chip that pay dividend every year.
It is not easy to find the good stock now. The company that owns the stock cannot generate profit.

6. Blogging and online business
This is the most famous passive income today. Create 500 articles and buy domain name and server. Put the articles to your blog. In few days, you will generate traffic from it.
Some blogger do not update the blog but they still generate little money. This passive income may you use to buy cloth, sandwich, fried chicken, and others. If you want seriously to create blog, you might generate thousand dollars.

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