When the money is just rolling in!

On one side many of us are working hard for the monthly paycheck. On the other side few of us has adjusted a bit smarter and get regular payouts every month and with little effort.

One can classify income in two parts: Active income and Passive income. The former is income like salary or fees for work done and the latter gives recurring payments as a result of something one has done back in time. People in general has a passive relationship to passive income, meaning they often forget that they get interests on their money in the bank and even forget the monthly child benefit (a monthly payment from social security if one has a child) and the like. Investors on the other hand have an active relationship to passive income.

Below are several different ways to acquire passive income, both classic- and more modern variants will be presented.

Source: iStock

INTEREST ON SAVINGS ACCOUNT

To no one's surprise, you lose money by having them in the bank as the banks can’t help you in zero out inflation. If you lock the money for some years to a bank account, you could however get a slightly higher interest rate. Nevertheless, we can say that having money in the bank is not very tempting in time of writing. On the other hand, it can also be tempting for others to just have the money in a safe place. However, these people are most likely struggling in the first place in getting a bank account in that specific country. Either way, most of us will try to look for other ways to save. The reason is the low interest rate we have had for the last 10 years. In 2008 though, you could lock away your savings for around 6% interest (at least what I had), while today it is well below 1%. 2008 where the days, 6% interest rate, risk free! Anyways, with today’s interest rate we can’t consider having money in the bank a lucrative way to earn passive income.

Nevertheless, the central banks have predicted many interest hikes going forward. Having money in the bank could yet again become a lucrative placement in the future, especially since the return is risk free (the banks tend to secure your money - in Norway it is around $250k for each bank)

EQUITY SAVINGS - MY FAVORITE: DIVIDENDS

The stock market can offer much better opportunities for returns than the banks could with a savings account. However, there is a greater downside risk here, but if you invest broadly enough, recent decades have shown that there is reason to expect a good return over time. According to experts in the field, one should assume an average nominal return (without deduction of costs) of 5.75% for shares. If you want to ensure that this return will result in regular payments, some activity is required on your part – you need to sell some shares every now and then.

A good alternative then is to buy companies that pay out dividends, I am a big fan of this! For those who are not familiar with it, there are companies that choose to distribute all or part of the profits to their shareholders. If you invest in companies that distribute high dividends, you can get a steady return without having to worry about the stock price (to some extent). I would characterize these payments as passive income. At the same time, there is nothing in the way of selling some of your shares to get the feeling of some more passive income.

RENTALS OF HOUSING

Renting out a home is the most common form of passive income. If you find a good tenant who stays for a longer period, renting out a home can be a good way to secure a monthly extra income, and which at the same time requires minimal work. The alternatives are to rent out a part of the home you live in or rent out another unit that you own. If you go for the former it is tax-free (at least in Norway), but if you go for the latter the work increases (caretaker service, travel costs and you also need to fill in some numbers to the tax authorities once a year). Thus, suddenly the passive income can become less and less passive. If, on the other hand, you build up several units, you can hire a caretaker in a 20% position and let him take care of all the caretaker services and the active-passive income has become passive again. Nevertheless, it is worth mentioning that the income rises for every new unit you acquire. Doing this right will favor you in the long run.

The big downside of secondary housing is that you must be able to afford to buy it and the entry price is often very high. Besides, maybe it's more tempting with a cabin in the mountain and why not buy a Tesla and a boat? The difference between buying a leisure property versus a rental home is that the former is a liability (expenses) while the latter is an asset (income). That is something to think about.

HARVEST THE BENEFITS OF YOUR OWN IDEAS

This is the point where only the sky is the limit. It's all about finding something that gives you income over a longer period. A broader approach to the rental market can be a way to go, as long as one is willing to give up the boat, car, cabin or the like. However, the most lucrative forms of passive income are about being creative and innovative!

Now, it is not the case that everyone can have it as Elon musk who just needs to tweet that he bought BTC and then BTC skyrockets. But there are many paths to follow if you are looking for a small extra income. It can be anything from selling your own design online to create engaging content here at HIVE. However, one should be doing this because you like it and not just because it can give you money. This will most likely raise the quality of your product or blog post, while the hours of work do not feel completely wasted even if you earn under a penny. In the worst case, you may have learned something yourself when you wrote the post and that is not bad!

As one can see out in the world there are many ways you can generate passive income. This post covered how you can earn passive income outside of the HIVE ecosystem. Next time I will cover how you can earn passive income inside of the HIVE ecosystem.

Cheers -Olebulls

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