• The joy of passive income



    “If you will do what most people won’t do for the next few years, then you can do what most people can’t do for the rest of your life.” – Wade Cook

    They say that there are three stages in a man’s life – man at work, man and money at work, and money at work. In an ideal world, I’m pretty sure everyone would love to skip the “man at work” stage and go straight to just “money at work”. The sad reality though is that many get stuck in the “man at work” stage for quite a while.

    Here are some passive income ideas that, maybe, you can start with as early as now so you won’t get stuck in that stage where you need to work.

    Business. The richest man in the Philippines for the nth year is Henry Sy. He is 91. What’s amazing is that he has been the richest man in the Philippines for quite some time now and I’m pretty sure at 91, he is no longer working. In fact, if you look at the top 10 richest in the Philippines, only one (Enrique Razon Jr) is below 60 years old. And again, I’d like to emphasize that for the past few years, these same names comprise the list, not much has changed.

    Businesses have unlimited income potential. This means when done right, this can give you the biggest passive income stream. In starting a business, you don’t need a big capital. At the same time, you can grow it the way you envision it to be and at your own pace.

    Starting your own business will entail work at the start. Establishing a stable business is not easy. Ensuring that it is consistently profitable is harder. But when you find the right business for you, it gives the highest reward.

    Strategy: Successful businessmen works hard, works smart and most importantly they have a vision of how they want their businesses to be. Figure out your long-term vision, start small and always be on the lookout for opportunities.

    Rentals. The most common passive income stream is through rentals. It can be a condominium unit, an apartment or a commercial property. What’s good about having rental properties is that aside from the rental income you get, your property can appreciate depending on its location.

    The downside though is buying a property comes with a steep price.

    Strategy: If you can pay for it in straight cash, then that would be the best scenario. Most people though would probably get a bank loan to finance their purchase. To maximize your income potential in rentals, ensure that you get a tenant as early as possible so you can use the rent income to pay your monthly amortization. Then set aside additional savings so you can pay-off your loan as early as possible, this way, you can realize your rental income early.

    Stocks. Publicly listed stocks give dividends when earnings are good. This can be a good source of passive income as well. If you are willing to take more risks and if you have good amount of savings, look for businesses with good potential but are in need of capital and be a passive investor. Being a passive investor would mean that you will provide capital in exchange for ownership in their company. It is pretty much similar to investing in publicly listed stocks, the difference is that there would be fewer investors and these companies are not as stable as most publicly-listed ones.

    Strategy: Do your due diligence. Don’t just invest because you have money, research on the businesses you are investing in. Know the people doing the day-to-day operations to give you more confidence on the businesses you are getting into. Look into their financial statements to see how profitable they were in the past and know the vision of the founding owners.

    Jeremy Jessley Tan is Registered Financial Planner of RFP Philippines. To learn more about personal financial planning, attend our FREE personal finance talk on Sept 20 and learn how to achieve financial freedom. To register, e-mail info@rfp.ph or text <name><e-mail><RFP> at 0917-9689774.



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