Compounded Wealth Building Using Passive Income: The golden secret to compounding wealth with a little ease is not a very daunting task. Earning right, saving good, and investing correct makes a big difference to one’s wealth-building goals! The concept of passive income is known to all but, only a few gain actual good returns.
Now, some of us don’t understand the actual meaning and concept of passive income. It is not a bed of roses and is not easy to earn, as the name suggests. The only difference is active income requires daily input, and passive income requires detailed research with a long term vision.
aThe actual investment is not money but time and effort. Once money starts growing, maintaining that growth using accurate tools and strategies is what compounds wealth building via passive income.
Passive Income: What and how?
It is regular earnings from not an employer or a fixed job. As per IRS (Internal Revenue Service), there are two sources for it: Rental Property
Business or trade which doesn’t require daily or a very active participation
It is an excellent way to grow your wealth. Its ‘get-rich-quick’ appeal comes with hidden and additional labor. For instance, one would have to maintain the rental property to keep the influx of ‘passive money.’
Few examples of passive income are:
- Bonds and bond index funds: Safer and less volatile than stocks
- Dividend index funds and exchange-traded funds: One doesn’t need to choose and pick single stocks to buy. It is a selection and group of well-rounded stocks.
- Dividend stocks: Invest, earn, and get a payout and re-invest if you choose to!
- High-yield savings accounts: It is a little slow yet a good investment with no actual efforts on your part.
- Real estate investment trusts (REITs): saves you from all the hassles of buying, maintaining the property, and adds up to your wealth.
- Blogging: Affiliate marketing, building traffic, and display advertising
Financial goals and needs are two different things. Once you start making money, don’t stop and start working on your financial goals. Having a side income never hurts and can prove to be very fruitful. Monthly earnings from your salary job are not enough to fulfill your travel, adventure, stylish-branded wardrobe, and other such dreams.
Below are 18 good reasons why you should be discussing Compounded Wealth Building Using Passive Income:
1) Power of compounding
The hard part is to earn and start making money. Once you initiate and kick start investments, the subsequent amount is easier to make. The common phrase ‘Wealth creates Wealth’ is very accurate and true. This is where compounding comes in. The rich become richer through his investments by hiring employees.
On the contrary, all the earnings you generate from your passive income compound your wealth. It helps you in growing; hence you help yourself!
2) Tax Impact
Even passive income will create a tax liability for you. The treatment of tax applied may differ, given the source of income. But sometimes you might use the loss from your investment as again to counterbalance tax from other sources.
3) Financial Freedom
Just depending on your salary income might not be enough. The current pandemic might have made you realize that. When you have an active income, you are focussed on your next promotion or job to meet your increased expenses. At the same time, having a passive income can save you some from a lot of stress. It adds to your assets and helps in tackling your liabilities.
4) Financial Security
This is very crucial and can be achieved only by building and maintaining your wealth. Your income does not guarantee stability and should not be relied upon completely. It is good to work and improve your income, but financial security can’t be neglected too.
In order to achieve that, more mental efforts and a better market sense are required. Compounded wealth building through passive income can be a great means to acquire that.
5) Acts as an emergency fund
Unexpected events like the pandemic we are going through can be rough times. In order to deal with them, just a monthly income is not sufficient. A far-sighted vision goes a long way.
6) Less income tax
Business people accrue less income tax charges than salaried people. Our revenue and income laws tax income more than our wealth.
7) Retire early
When you have saved and invested enough, you get to decide your retirement age. You can also choose where and how you want to spend your time after that. Your retirement doesn’t have to depend on your salary or income.
8) Generational Wealth
An age-old concept based on basic human nature: caring and looking after one’s kids. Who doesn’t love ‘family money’! Extra income sources help you in building a reservoir for you and your kids. After all, everyone happily accepts a passed on wealth.
9) Managing generational wealth
Keeping and compounding generational wealth is a very crucial step. More useful investments and side hustle are managing and growing your wealth to keep your financial position intact.
10) Follow your heart
To create a blog, you have wanted to for so long or make your travel vlog or start trading! Planning to earn money from passive income can be a good venture for you. It allows you to dive into your interested field and follow your passion without jeopardizing your savings. Since you have an active income, it can be a chance to leap of faith as it will not obstruct you in delivering your responsibilities.
10) Live more worry less
You can afford the life you have always wanted. You won’t have to worry about managing expenses or cutting your expenditure to plan and afford a trip to your favorite holiday destination. It gives you more relaxation time hence a healthy mind. It saves you from worrying for tomorrow and allows you to immerse yourself in the present.
11) Continue learning
Everyone earns to look after their needs and responsibilities. But in that run, we stop learning and growing. When we are not focussed on responsibilities alone, we have much room to invest time on ourselves. Hence, we get more opportunities to learn new things.
12) Invest more on your child
Just educating your child is not enough. Providing good exposure, enhancing skills, resources, and opportunities to ensure a well-rounded growth is a visionary investment. This will not only make your child self reliant but will also manage and grow the wealth you built.
13) More Family time
You have a sustainable passive income that saves you from working extra hours or days. It gives you more and quality time with your family. After all, you are building everything to be happy and contented with them. Neglecting your family to provide for them and might distance you from the rest, which is not a good thing to happen.
14) Less physical work
Your daily engagement and participation are not required. That’s the biggest advantage of passive income. It doesn’t restrict you to one single income source at a time.
15) Lesser liabilities
More liabilities lead to lesser savings and nearly zero investments. This is an unhealthy economic habit or situation. With more side hustles and earnings, you can pay off your liabilities without fiddling with your savings.
16) Remote work
You are the CEO, as well as the employee of your business. You get to choose the work station, timing, rates, and everything. Hence, you exercise more flexibility, creativity, and try new challenges. The best part is you are not accountable to anyone but yourself.
17) Build a life
In between 9 to 5 life and making a living, we forget to build and live a life. With a side inflow of money, you can live in a bungalow with a sea-facing view, read your favourite novel on a cruise or own a sports care you have only seen in movies!
18) Never look back
When you have a sustainable income that has good potential and continues as per the market value, you don’t need to depend on your job. If you took up that job out of necessity and not passion, you may now leave it behind. You don’t have to wake up every day, curse your job, put on a sluggish smile, and continue. You can venture into fields you have always cared about.
If you still have doubts about the power and influence of passive income to compound and build your wealth, you need to give it a second read! Wealth building is about investments and savings and the correct mindset, strategies, and vision. The potential of passion income to grow that too exponentially is what makes it a smart choice. Managed actions, constant efforts, and consistency generate passive income. But before any of that, an initiative and a little push in the correct direction helps to lay foundation while efficiently form the base.
Read More Posts in BLOGBIND