Passive Income for Financial Freedom

What is Passive Income?

Passive Income is achieved by completing a single goal, investing a single amount of money, or developing a particular thing once, but then earning income from it over and over again. An example of this could be a website with advertising space on it. You build the site once, put the ads up once, but get paid every month for advertising other peoples products. Im sure you get the idea.

Passive Income is sometimes referred to as Residual Income. This is essentially the same thing. Passive Income is a simple concept, but one which people overlook time and time again. Many people are used to trading their time for money. This is a scenario that cannot lead to a good end result. There will come a time when you have reached the age to retire, or worse, you are forced to retire due to an illness or similar. What will you do then? Hopefully, for these peoples sakes, they have saved enough money to support themselves for their remaining few years until death.

To me this sounds like a rediculous scenario, and one which can never produce real happiness and satisfaction within your life. The concept of working until you are of a retirement age is an idea which I cannot relate to.

With a few simple and smart investments of either your time, money or both, you can be well on your way to financial freedom much sooner than you think.

There are a few simple steps to working this equation out, and they are listed below.

1. Work out your current debts - including credit cards - and write them down. Be realistic. If the idea of doing this scares you, then I suggest you do it by yourself first, before you discuss it with your partner/spouse.

2. Work out your saleable assets - by saleable, I mean assets that can be converted to cash with little effort. For example, if you hold any commodities such as Gold or Silver, these are extremely saleable assets. They can be converted to cash at any time. If you own a business, this is still saleable, but be aware that you will need to wait to find a suitable buyer. Again, be realistic here.

3. Make a list of your current weekly/fortnightly/monthly expenses. Include everything that has to be covered.

4. You are now in a position where you can look at the figures you have worked out and see what sort of financial position you are in. For example, if you have debts of $50,000, but own a block of land valued at $60,000, you know that by selling the land, you are able to clear your debt. If some of your monthly expenses include loan payments for that block of land, you know that these payments will affectively be erased as well. What you want to ask yourself is this - What are you really working for? I would say that for most people, the answer is simple... MONEY. I know that was my answer.

5. After running a few of these scenarios through your mind while you look over your figures, you can now see the exact amount of money you need to cover your expenses. This become your Passive Income Goal.

Creating your Passive Income Goal:

Now you have all the realistic details of your current financial situation, and you now know what you would need to earn to cover your expenses. Now you can start looking for opportunities that suit your situation. For example, I invest in a company that uses my money to trade the Forex Arbitrage Market. (If you dont know what this is, plug the word "arbitrage" into Google, and there will be millions of webpages to learn from.) They pay me once per month, a total of 25% or more profit. So for example, if you were using this scenario, and your monthly expenses were arouund $5,000, you would need to invest $20,000 into this investment to achieve the level of income required to leave your J.O.B. and have enough Passive Income to sustain your current level of living. I hope this makes sense. This is just an example, I actually invest with many different companies across many different markets, to ensure that I am always covered. But I'm sure you get the general idea.

The main thing to take away from this article is the following:

1. If you don't know what you are looking for you will never find it.

2. By creating a clear guide for yourself as to what your financial position is, you now know your realistic NEEDS. This is important so that you don't waste your time with opportunities that do not serve your purposes. For example, if you want passive income, do not buy a house and live in it. This is an investment that will produce a CAPITAL GAIN, not an INCOME GAIN. And so on...

Stay tuned to my hubs for more information.