“You have to have multiple income streams!” That phrase seems to be all over social media, with everyone boasting about their side hustles, passive income strategies, and all the different ways they’re getting paid. So what really is passive income? And how to you get it?
A lot of people think that earning passive income means they need a second job. But it’s actually quite the opposite. Passive income is something that you set up initially but it doesn’t take much work to maintain. Think about earnings from an investment account, if the company grows and you earn dividends in return, you’re earning passive income. Another great example is writing a book or setting up a rental property. While the initial stages of writing the book or setting up the rental property of course took a lot of work, now that they’re complete the idea is that you will receive income from these sources for years to come without having to put a significant amount of extra work day in and day out.
While for most people passive income will not replace the earned income they get through a full time job, it is a great strategy to implement that can increase wealth, reduce debt, and be used as a cushion during an unexpected event.
When we see people starting “side hustles” or second jobs, typically that would be considered another form of earned income because the job that you are working on the side will still take up a significant amount of your time each week. Ultimately, determining if you need a second income stream highly depends on your specific situation. How much is your family earning? Are you on track with your savings goals? Do you live the lifestyle that you want? Do you even have time to add another job to your plate?
If you decide to add another income stream to your plate, now you have to determine which route to go. Do you have the solution to a problem? Do you have an idea that could become passive income down the road? Or do you prefer the security of working for an employer? Whatever you decide, make sure that you’re making wise decisions with this money you are earning. You don’t want to be taking extra time away from your family if the money is just going to waste, so save, invest, pay down debt and set yourself and your family up financially for the future.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.