Earn but not work: how to increase any income

What are the income

Remember, at the university they told us: first you work for the student’s record, and then the student’s record works for you. It’s the same with income. Without doing anything, it will not be possible to ensure a carefree life without the need to work from morning to evening.

Only “golden” boys and girls, heirs of the richest dynasties and oil kings, can afford not to work a day. The rest of the money is harder to come by. But «hard» money (active income) can be turned into «easy» money (passive income).

Active Income — this is what you earn with your work: salary from hired work, profit from doing business, fees and rewards for services rendered. You spend time, use skills, produce an intellectual or material product. In short, active can be called income received from the work done.

passive income It’s money you don’t have to work for. These include interest on bank deposits, dividends from holding shares, coupon income on bonds and other deductions that drip to you “just like that”.

Let’s practice distinguishing passive income from active income.

• Example #1: Your father once wrote a popular song and you, like the hero of the film «My Boy» with Hugh Grant, live on royalties. What is your income?
• Example #2: All day long you track the price of a large company’s stock on the stock exchange, trying to buy low in order to sell high. You seize the moment and sell shares for a profit of several hundred dollars. What income did you receive?

Correct answers: in the first case — passive, in the second — active.

However, most of us get active income at work, and even the most beloved work may not be satisfied with the salary or get bored. Therefore, I suggest that you learn how to earn actively and passively at the same time in order to pave the way for financial independence.

Active and even more active

«Heavy» money is so hard to get, but for some reason it is spent easily and quickly. To create a reserve for passive income, you need to make a «down payment», as they say, «work on the record book.» You can start saving from your current salary, if it allows, or start earning more.

The universal rule for «hamsters» is to stock up, that is, set aside a certain percentage of income every month. It doesn’t matter how much it will be, the fact that you save money is important.

If you keep track of expenses and understand how much you are spending, it will be easy for you to determine the amount for comfortable savings. You can make a rule: on payday, immediately withdraw cash or transfer a certain amount to another account in your bank account. Many banks offer “piggy bank” accounts with interest on the balance, that is, you will already receive the coveted passive income.

If the salary is barely enough to live on, not to mention savings, you can try to increase it. The author of the book «The Path to Financial Freedom» Bodo Schaefer claims that any active income can be increased by 20-100% within a year.

Here are a few ways to get more from a paid job or as an entrepreneur:

1. Ask your boss for a pay rise. Perhaps you have long outgrown the amount that is listed in the employment contract. Yes, and inflation is only creeping up, and not all employers index payments to the team. Oftentimes, an awkward request for a raise is more easily accepted by superiors than we think. If you are a valuable employee and are developing in your position, there is every chance of a promotion. In case of refusal, ask to justify it: you will learn a lot about the boss or the state of the company. Entrepreneurs should justifiably negotiate with customers about increasing the cost of services.
2. Upgrade your skills. Now there are many courses, books, webinars, video tutorials, sites on any topic, from learning languages ​​to programming. The world does not stand still, new professions appear, people are replaced by robots, low-skilled labor has not been appreciated for a long time. Being on the wave of these changes is a strong competitive advantage.
3. Looking for side jobs. There are opportunities for additional income for everyone. It doesn’t matter if you are an accountant or a journalist: there are definitely orders on freelance exchanges. Representatives of any profession can consult, teach, write expert articles, provide private services. Almost every job has the opportunity to optimize time and spend it on part-time work. Additional bonuses for payment will be the experience gained and new contacts in the face of customers.

Towards Passive Wealth

Sources of passive income are not necessarily formed by active labor. You can sell your grandmother’s apartment or a boring diamond ring and, instead of extraordinary spending, place money for investment. Actually, investments are the main way to receive passive income.

About ten years ago, the owners of large sums without exception carried money to the bank. A bank deposit is still considered the simplest and most reliable option for passive multiplication of funds. In fact, a deposit can also be called an investment: you invest in a credit institution at interest.

Recently, deposits are losing their attractiveness for macroeconomic reasons. Interest rates have been compared with the rate of inflation, and sometimes even make up a lower percentage. Thus, your hope for profit «turns into a pumpkin.»

An alternative to bank deposits can be the purchase of bonds or reliable stocks. To do this, you will need a brokerage account. Bonds are state, municipal and corporate. Seekers of passive income are interested in coupon payments on them. The percentage of annual income on bonds is fixed and usually at least 1-1,5% higher than on deposits.

Shareholders receive passive income in the form of dividends — their size, as a rule, depends on the financial results of the company. The most reliable option is to buy shares of large «giants» who have been working for many years and have large capitals. But investing is a separate and very interesting topic.