3 passive income ideas to build wealth, from a financial planner
3 passive income ideas to build wealth, from a financial planner
Building Passive Income: Myths, Realities, and Opportunities
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Passive income is the ultimate financial dream. Who wouldn’t want money flowing into their accounts without any effort? However, the reality is that passive income is often just a myth. If it were easy and realistic, we’d all be living off our passive income streams. But this doesn’t mean that creating passive income is impossible. While it may not be accessible to everyone, there are legitimate paths to building your own passive income stream.
The Myth of Passive Income
As a financial planner, I have to be honest with you – passive income is a bit of a myth. It’s important to acknowledge that even the opportunities to create passive income are not accessible to everyone. Pretending otherwise can be harmful, distracting us from focusing on what we should be doing: wisely managing the income we actively earn.
Building a Strong Investment Portfolio
One legitimate path to passive income is building a strong investment portfolio. During your working years, the idea is to contribute to investments and create a portfolio of assets that will eventually provide a livable income. Online brokerages, such as Wealthfront, make it easy to get started.
A well-diversified and strategically managed portfolio allows you to buy assets that appreciate over time. In the future, you can sell those assets for cash without additional work or receive income from them in the form of dividends. However, it’s important to note that building a passive income stream through investment requires upfront time, effort, and high savings rate while actively working.
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Starting or Investing in a Business
Another path to passive income is starting a business or investing in an existing one. To create passive income through a business, it should operate without your direct involvement. You need to hire employees who can deliver your service or create your product, allowing you to retain ownership and a portion of the profits.
Starting your own business gives you the freedom to create in a way that aligns with your skills and experience. However, not all businesses succeed, and even fewer reach the point where the owner can earn true passive income. Investing in an existing business also provides an ownership stake, but it still carries risks. Additionally, sufficient upfront capital is required for this path, which often becomes part of a longer-term plan.
Leveraging Your Work for Future Royalties
Selling the rights to valuable assets can establish a passive income stream. This could include intellectual property like processes or systems for businesses or creative works like stories or scripts for potential films. Publishing books, courses, or other resources can also generate recurring future income through royalties.
While this path may require substantial initial effort, it offers an avenue to passive income for the future. However, it is worth noting that this method is available to only a small group of people with specific skills and experience.
In conclusion, while passive income may be a dream for many, it’s important to approach it with realistic expectations. Building a strong investment portfolio, starting or investing in a business, and leveraging your work for future royalties are three legitimate paths to creating passive income. However, each path requires proactive effort and careful consideration of its suitability and risks. So, rather than chasing a ghostly idea, focus on actively managing your income and making wise financial decisions to create a secure and prosperous future.
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