Something which has become a really popular conversation on social media would be the idea of investing and creating passive income for yourself. There’s many people who make it seem like a quick and easy way to make money. This however is not really the case. Learning to invest and create a passive income takes a lot of time and effort. It is something which should not be taken lightly. However, when done correctly for the person it can be really beneficial in securing your future. Learning to create a passive income and invest properly is a great way to prepare for retirement.
As stated on nerdwallet.com “everyone has a unique financial situation.” Therefore, the way we all choose to invest is different. Before starting to invest, it is important to understand your finances. If you don’t know how your money works, then you won’t be able to properly invest where it works for you. Learning how to manage your money can be difficult. First, if you are able to, speak with a financial planner to help you learn about your finances. Here at Revived Prosperity, we offer financial planning consultations. Click here to check it out and speak with our experienced entrepreneurs!
Second, you have to choose a “‘do-it-yourself’ or ‘manage it for me’ approach” (nerdwallet.com). Although DIY investing sounds stressful, over time it has become common and is not as scary as it sounds. According to investopedia.com, DIY investing is described as “individual investors choose to build and manage their own portfolios.” An easy way to do this is online.
“In the journey of entrepreneurship, tenacity of purpose is supreme.” Aliko Dangote
Doing this online allows you to make the portfolio your own. Therefore, it is personalized and many sites offer “free interactive personal financial advice” (investopedia.com). Another option is to consider utilizing a Robo advisor, as these automated systems create portfolios for you. Accordingly, Robo advisors “technical trading algorithms…dictate their strategy; while investors can have greater exposure to all types of potential investments” (investopedia.com).
Third, you have to decide which type of investments you will participate in. These can include: “401(k), IRA, taxable brokerage account, education investment account” (nerdwallet.com). A 401(k) is defined by forbes.com as “defined contribution plan, which means…employees decide how much to contribute to their account.” An IRA “allows an individual to save for retirement with tax-free growth or on a tax-deferred basis” (fidelity.com).
Forbes.com states a “taxable investment account lets you buy and sell investments like stocks, bonds, exchange traded funds (ETFs) and index funds.” An education investment account, or 529 plan, is a way for students to “cut down on student loan costs” (bankrate.com). All of these DIY investment accounts allow for people to learn to invest and create a passive income. Therfore, it is important to review all of your options and pick which one fits best for you. Then, make a plan to open an account.
“Hold on to your dreams of a better life and stay committed to striving to realize it.”
Earl G. Graves, Sr.
Fourth, you will have to pick where your money should be invested. There are many options available as stated on nerdwallet.com including: stocks, bonds, mutual funds, real estate, etc. These common options for investing are defined as:
- Stocks: Owning part of a company and hoping it gains value over time.
- Bonds: Money borrowed by a person or business to get a project funded, debt refinanced, etc.
- Mutual Funds: A way to purchase multiple investments at once.
- Real Estate: Becoming a landlord, owning a property, or investing in REITs (Real Estate Investment Trusts, reit.com).
Let’s talk passive income. Passive income is “earnings derived from a rental property, limited partnership, or other enterprise in which a person is not actively involved” (investopedia.com). Most of us are familiar with active income, where people are actively working for some form of wage. So, the idea of passive income can seem rather confusing. One example of this would be owning an apartment building, but having a property management company run it. Since you are not actively running the building, you are not actively involved. Therefore, the money from this property becomes passive income.
“I had to make my own living and my own opportunity. But I made it! Don’t sit down and wait for the opportunities to come. Get up and make them.”
Madam C.J. Walker
Let’s take a look at this list from forbes.com for some examples of passive income streams. You may not like one way, therefore it is important to look at multiple ways. This will help you pick out what may work for you:
- Dividend Stocks: Receiving payouts from company profits when you invest in a business.
- Vending Machines: Only upkeep really needed is restocking every so often.
- Custom Design Products: Uploading your own creations to “print on demand websites” (i.e CafePress, Redbubble).
- Transportation Rentals/Car Advertising: Renting your car out to others, or putting decals from advertisers on your car.
There are many unique ways to creative passive income. Therefore, it is important to use what options are available to you.
While learning to invest and create a passive income seems stressful, it can be a great way to start saving for retirement. Using multiple methods is a great way to build up your savings, therefore it is important to begin early. Check out the videos below for more tips and tricks!:
