The road to financial freedom: Passive Income (Part 1)

By: @CryptoCountant

My previous articles dealt with the payment of taxes and the management of sufficient liquidity to be able to optimally profit of opportunities in the market.

So what would one do, if that person has enough liquidity and savings?

You turn that capital into passive income.

In this article I explain how you can convert your capital into passive income.

Any investor should ensure that sufficient passive income is generated from their investments. Many of us currently only work to generate.

There is a good chance that you, like me, would do different or less amount of work if you no longer have to only work for an income. Sufficient passive income allows you to be in a state that you no longer have to worry about financial obligations.

You can lead your life the way you want, you can determine your daily routine and the work you do is no longer only necessary to pay your bills. In my eyes, enough passive income leads to true financial freedom. I now will treat a number of potential sources of income.

Real Estate

Real estate is one of the most popular sources of passive income. Real estate can be land, buildings and houses or specific residential and office spaces. The goals for a person to invest in real estate can be:

1. Obtaining rental income each month, this will continue during the time you rent the property to tenants.

2. Increased value of the invested real estate, so the investor can sell it with a profit after a longer period of time. This can be done when the tenants leave or the sell-market is in a good state.

Depending on the size of capital, it may not be possible in your situation to invest directly in real estate. In this case crowdfunded real estate is a valid option.

There are parties that offer the investor the chance to invest in real-estate without having a large amount of capital. The goal of these parties is to connect investors and invest into (large) real-estate projects. The ownership of the property, as well as the rental income, are then spread over a number of participants. So, you basically get income and potential capital gains proportionally to the invested amount.

This can even be possible from an amount as low as 50$. Please note you research the party that you’re going to give your money. To ensure you find a party with a good reputation. It is also wise not to place all your trust in one party, and find different providers of these services so you spread your risk in the case one party fails.

Dividend

Traditionally investment in stocks was a safe and sound option for investors. But did you know investing in stocks often leads to a passive income generation?

By investing in stocks, the investors obtain a %-share of the invested company.

This share gives the investor the right to a part of the annual profit distribution, which is often once a year. This profit distribution is called dividend. If you’re investing in standard shares, you have, in addition to a potentially higher value when selling after a long period, also passive income during the period that you hold these shares, as long as the company pays out profits. There is a reason why seasoned investors choose to invest in shares because historically it has always been a good choice. You will often hear to spread your investments across different companies. In addition to this, I also advise you to spread your investments across different industries and countries. Because if you invest into the entire fuel-industry and the entire industry fails, all companies you have invested in will go bankrupt even though you have sufficiently spread your investments into different companies.

Reduce expenses

An average person nowadays has a telephone, a laptop or computer, a car and a rented house. Unfortunately, it often happens that these needs are met by loans or by renting them. Sometimes you don’t have a choice. However, what people often don’t realize is that when buying a telephone with pay-off, you pay interest to the company.

An enormous easy way to have more money on a monthly basis is to pay off these loans.

To do this, create an overview of your annual expenses once, and track expenses that return periodically. If you have the opportunity to have these expenses disappear by paying them off, do so. Examples may be repaying loans, buying new cars or phones with cash or buy used cars and phones. And move from a rental house to one with a mortgage. Even though you’re paying interest with a mortgage, it’s still way better than paying rent. In addition to this advice, is to only buy stuff you need. For example, you don’t need the newest car or cellphone. You don’t need all those subscriptions to different services. Only spend the money on things that you really need, so that you have more money left for the fun things in life.

This was the first part of my article on passive income. There are still more subjects to cover. That is why I hope to see you again as a reader for the second part of this subject.