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Millennial Tips: 8 Passive Income That Will Help You Become Financially Stable Before 50

Millennial Tips: 8 Passive Incomes That Will Help You Achieve Your Financial Dream Before 50(Photo: iStock)

The focus on passive income among millennials has a specific purpose, and that purpose isn’t just to increase income. Many millennial workers want to retire by the time they are 50 and become financially independent, according to a September 2022 article in The New York Times.

Retiring at the age of 50 is equivalent to retiring 15 years earlier than previous generations. Many of the millennials interviewed for this piece described their attitudes toward early retirement as being influenced by economic uncertainty. Others were quoted as wanting to work for fun or for themselves.

To achieve the goal of early retirement, you must make a serious commitment to saving money now. According to Christopher Lyman, a CFP with Allied Financial Advisors, saving 50% to 60% of one’s salary is required to achieve this level of financial independence.

Enter the stream of passive income (or streams). Many millennials are pursuing various forms of passive income in order to achieve their financial independence goals. Here’s a tactical breakdown of how millennials generate passive income.

Millennial Tips: 8 Passive Income That Will Help You Achieve Your Financial Dream Before 50(Photo: https://beginnerspassiveincome.com/)

What Is the Difference Between Passive and Active Income?

According to Mint, passive income is a source of income that can be obtained with little to no effort. The biggest distinction between active and passive income is the amount of work required.

Active income necessitates consistent effort and time to sustain. Your full-time salaried (or hourly) job, a side hustle like freelance writing or tutoring, or selling rental properties are all examples of active income. Passive income requires far less maintenance. You could, for example, sell stock photos online or engage in affiliate marketing.

A third type of income is known as portfolio income. Dividends, interest, capital gains, and stock investments are all examples of this. Please keep in mind that, according to IRS Publication 925, portfolio income is not considered passive activity income.

There are several ways for millennials to generate passive income. If you’re new to passive income, consider experimenting with one or more of the following streams:

Popular Passive Income Streams Among Millennials

  • Creating a blog
  • Offering an online course for sale (Pro tip: make sure you have all required accreditations to properly bill yourself as an expert)
  • Online stock photo sales
  • Creating a book or releasing an eBook
  • Taking part in affiliate marketing
  • Investing in rental properties in real estate
  • Recreational equipment rentals, such as boats, kayaks, and swimming pools
  • Storage space for rent

What Exactly Isn’t Passive Income?

The answer to this question should point millennials who want to earn passive income in the right direction.

The IRS defines certain activities as not being passive in Publication 925. These include trade or business activities in which you materially participated during the tax year, a working interest in an oil or gas well, or the rental of a dwelling unit for more than 14 days during the year. Trading personal property for the account of those who own interests in the activity is another ineligible passive activity, as are real estate professionals who materially participate in rental real estate activities.

Should You Aim for Passive Income?

It is possible to achieve financial independence, even if it is difficult. Multiple sources of income, including passive income, can help make this a reality and be an important part of your overall financial plan for achieving financial freedom.

The passive income stream you select should ideally provide a positive return on investment while posing few risks. Determine the opportunity in which you believe you have the most expertise and are most comfortable earning passive income. Don’t feel obligated to pursue every type of passive income stream at the same time. Determine which method works best for you and begin there.

 

Read also:

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