Is your salary enough to pay off your expenses while investing with a long-term view? It is not a matter of shame if you are not earning enough. What matters is if the same pattern continues even after you have retired. If you do not have enough now, how do you expect to have enough for tomorrow in the face of no regular income or when you have to spend more on your health and lifestyle synonymous with advanced age-related needs?
To counter this problem, you must focus on one or more sources of passive income. Just a cursory focus on passive income will not do; pay attention to it as much as you focus on your regular income sources. This will not help you optimise your earning capacity but raise your income bar while mitigating capital risk during retirement. Apart, it will keep your mind engaged, nimble and flexible to be able to imbibe new information and assimilate details regarding earnings and investments.
How do we get started?
First, understand what is passive income. Next, check for your hobbies and additional skills that will help you earn more apart from your regular job. Passive income is akin to taking up a freelancing jig or opening up a side business to earn some extra money. In millennial terms, you call it “hustling”. There are a lot of misconceptions surrounding passive income sources, especially, those involving freelancing, that must be deterred with a strong determination.
Once you have decided on your passive income source, you must be steadfast in it. Avoid the tendency “Start and forget it”. Just because passive income is “passive” in nature does not give you the leeway to take it for granted. Treat it like the way you treat your regular income sources.
The best part of going passive is that there is no full-fledged involvement. This translates to minimal adjustment of the products sold or services provided. There is not much additional cost involved in maintaining the product. The effort is sporadic, which means that you can pay attention to it once or twice a week while continuing to earn from it.
Do I have to go digital?
You do not have to be all over the web to earn some extra money. People skilled in certain subjects can teach in their free time. This will help them earn more. Good knowledge of animation and video editing can help you earn as high as ₹50,000 extra every month. Some people design fabric and mattresses or provide electrical and plumbing services during the weekend, thus, helping them earn extra. A few bundles of currency in hand every month keeps the risk of financial insecurities at bay as now you have more money to save and invest. However, for this, you must focus on a sustained and disciplined effort to maintain and retain your income too.
Regularity of passive income
In most cases, passive income is sporadic and erratic. But, what if you could turn it into a regular income source by just focusing on doing something extra each day? You must set a standard so that you know if you have met it as planned. Do not disregard or relegate it as forced labour. Instead, engage yourself in your passive work wholeheartedly. Create a passive product that you love working on, and you will never have to work a day in your life. This will not only be a way to save more money for retirement but can also be practised post-retirement to ensure continued income even in the absence of your regular job or income source.
Set a target regarding your passive income. Note down in your diary how much you want to earn through indirect means. No amount is small enough. Start with earning at least ₹2500 and then scale up. Use this money to prep up your existing investments. If you had not invested enough, then put this money in a new investment plan like a retirement fund or an aggressive hybrid mutual fund that will put your money in both equities and debt depending on which direction the market moves.
Small recurring earnings when turned into investments will ensure a disciplined approach toward investment. Then review the fund performance after a decade or so and you will realize how much you had accumulated over time. The corpus may not be huge, but will be enough to lend you the much-needed financial backup to pursue your hobbies or pay for your lifestyle post-retirement.
Invest time and effort
Creating a passive income source and then keeping it running necessitates consistency. Expending time and effort is necessary to make it a success. The best way to ensure persistency in passive income sources is to make it a crucial part of your retirement planning.
Plan your investments surrounding the income that you earn from these sources. Make sure that you do not spend a penny of what you earn from these sources. Remember that financial independence can not only be obtained by increasing your means but also by reducing your wants. Many people always focus on the former and seldom on the latter.
Then choose the right assets to invest this money. The right asset allocation is important in any retirement planning. But before that, focus on asset accumulation before asset allocation. Dividing a small sum of money among various asset classes will never make you rich.