How to Earn a Passive Income

by Gily Tenorio on January 4, 2012

in Personal Finance


Basically, there are two kinds of income a person can have: active and passive income. An active income is the money that you get from employment or business wherein you are directly working or have an active involvement. To get an active income, you should work almost everyday or at least five days a week for government employees. In case you are employed by a company, you need to come to your work according to your working schedule and job responsibilities. On the other hand, if you have a business, you must managed or supervised it regularly or in a daily basis.

A passive income, on the other hand, is the money you get from work or business wherein you are indirectly or have little participation in working. After you established your passive income generating tool, you can leave it there but it will still earn money for you. Robert Kiyosaki, a well-know author of “Rich Dad, Poor Dad“, told in his book that passive income should be the goal of each person who wants to have financial freedom. The principle in passive income is that even though you don’t work of involve directly in it, you can still earn money from it.

Ways to Earn Passive Income

There are numerous ways and methods on how to earn a passive income these days. If you still don’t know how you can earn a passive income, just read more because I listed here some of the easier and achievable ways.

1. Make Money Online

First on the list to earn a passive income is through make money online. Under this category, there are diverse ways to make money online, the most notable one is through blogging. However, you could also try to make websites for affiliate marketing in Amazon, ClickBank, or other affiliate websites.

Right now, I’m earning a semi-passive income through blogging. I could say it is not easy to earn money from the Internet by blogging. It requires hard work at the beginning but as you learned and gain more experiences along the way, the task will be lighter and more enjoyable. This year, I will start to make an Amazon-affiliate website dedicated to sell some Amazon products.

One advantage of making money online is it requires a small start-up capital, skills and knowledge. The capital or money that you need will be used to buy your own domain and web hosting. Even you’re a newbie in website design and blogging, you can earn money online as long as you have the patience and dedication.

2. Rental of Real Estate

I have a friend who are earning a passive income from the rental of his commercial building and lot that gives him a monthly passive income of more than P20,000 each month. This scenario is one good example of a passive income. He doesn’t need to work or regularly do maintenance for his building but he earns from it through the rental fee by the current occupants.

Another best example of passive income from real estate is apartment rental. You can get a steady or second stream of income from the apartments you rented to other people as long as they are living there. After construction of the apartment, you don’t need to do anything after that, only some minor maintenance may be required after many years have passed.

3. Dividend Stocks

Stocks can be one good source of passive income but not all, only those which are paying consistent dividends. These stocks are called dividend stocks. Almost all stocks are paying dividends to their stockholders because it is a part of their profit-sharing and it is included in the company policy.

In the Philippines, all stocks included in the Philippine stock Exchange Index (PSEi) are paying dividends to their stockholders. So it will be wiser to invest to these stocks rather than to those who are not giving dividends. Some of the notable dividend stocks in the Philippines are PLDT, URC, GMA7, FPH, JFC and GLO.

4. Mutual Fund that Pays Dividends

Mutual fund is another alternative when you don’t want to invest directly in the stock market because of lack of time and experience. Only few mutual fund companies are giving dividends so you should be aware of this. In the Philippines, I know ATR Kim Eng Kabuhayan fund gives dividend to its shareholders.

Since mutual fund is managed by a professional fund manager, the investment risk is lower compared with stock investing. It has also lower initial opening deposit making it affordable and accessible by low-income earning individual.

5. Royalty Fee from Books or Songs

If you are good in writing or composing of songs, royalty fee is your source of passive income. Book authors get royalty income from every book that have been sold while composers get it through playing their music in radios, TVs or sold audio products.

From the list above, I think the easier ways to earn a passive income are through make money online (by blogging) and investing in mutual fund that pays dividends unless you are a book author or song composer.

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