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How can I increase my income without working more?

How can I increase my income without working more?

For most people who work a regular 9 to 5 job they are trading hours for dollars. The only way they can increase their income is to work longer hours. Or ask the boss for a raise. But what if you were able to tap an income stream that poured money into your bank account no matter what you did? Even when you were asleep! This is called passive income and is the best way to increase your income without working longer, harder hours.


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What is passive income?

The IRS has determined that there are only two kinds of passive income activities:

  • Trade or business activities in which you don’t materially participate during the year, and
  • Rental activities, even if you do materially participate in them, unless you’re a real estate professional.

It doesn’t matter if the rental activity is in the form of a lease or service contract or some other arrangement.

I would argue that earning income from your investments is also a form of passive income. For example, if you owned stock in a company that issued a dividend, that would count as income for you in which you did nothing to earn. Even earning interest on the deposits you have at your local bank is a type of passive income. But the IRS doesn’t think that way and they tax portfolio gains differently than what they consider to be passive income. Please consult a tax professional before making any decisions that you rely on.


The benefits of a passive income stream

The benefits of a passive income stream:

  1. Gives you the freedom of time: We can only spend time; we cannot save it or make more of it like we can money. Arguably this makes it our most precious asset. When you decouple the requirement to trade hours for dollars you gain freedom. So long as your passive income surpasses your monthly expenses then the struggle to make ends meet is much easier. You have the freedom to change jobs, travel, start a family, whatever. In fact, you are on your way to total financial freedom.
  2. Reduces stress, anxiety and fear of the future: Not having to worry about how to pay the bills at the end of the month will help to reduce your stress levels. You no longer need to worry about losing your job or getting sick. You can even take time to look after a loved one that has fallen sick.
  3. Allows you to pursue doing what you love rather than pay the bills: So many of us work for a living instead of pursuing the joy of a vocation that suits us. When our passive income streams free us from having to work, we can do the things we love. Be that travel, art, music or a completely new line of enjoyable work. We can even pursue our philanthropic ideals when we no longer have to worry about paying the bills.
  4. Ability to live and work from anywhere: Depending on the source of your passive income stream you can literally live and work from anywhere in the world. You don’t need to be tied to a geographic location to sell an e-book for example.
  5. Platform for financial stability and growth: We you no longer have to face the rat race it allows you the time to investigate and further strengthen your financial stability and even grow it. You can really dig deep in your due diligence of where to invest your money and achieve financial clarity. Your goals will achieve a new sense of focus as you strive to make them a reality.


The hard way to find a passive income stream: It is not easy to find a trade or business activity that you can join as a sort of silent partner, where you do nothing in the day-to-day activities to help that business, yet can still earn an income from that business. The usual way is to find a great business that is looking for start up cash or an investment of some sort. You give it to them with the understanding that you will share in the profits and then generally you get out of the way. The hard part is finding the business and hope they don’t take your money and then go under.


The hard way to find a passive income stream

Real estate advantages: Real estate, on the other hand, has many benefits and advantages in helping you earn a passive income.

  • Rental income really is passive income – once you set it up. Naturally it does take some time and effort to find a suitable property and turn it into your passive income generator. It is well worth the effort on the front end because with the right tenants you can earn a monthly check for years and years to come.
  • Sense of security backed by real estate. If everything goes wrong and you can no longer accept the passive income that rentals bring, your investment is backed by a real tangible asset. You can sell the property and get your initial investment back. You may even turn a profit if your real estate has appreciated over the years that you owned the property.
  • Tax advantages: You are allowed to deduct your expenses that you incurred to earn your rental income. This includes your regular maintenance on the building, mortgage interest and property taxes. This is fantastic come income tax time, as no one enjoys giving their hard-earned money to the government.
  • Protection against inflation: When your passive income stream comes from rental income you are protected against inflation. As inflation rises each year the amount of goods and services that a dollar can purchase decreases. However, you can always raise the rent to keep up with inflation so that your purchasing power does not decrease.
  • Professional management options make rental income hassle free: When you hire a professional management company to look after your property you relieve yourself of a burden. They will look after regular maintenance, advertising, credit checks, rowdy tenants and more.

    Essentially a professional property management company will help you find better tenants, take care of legal problems and ensure you have shorter vacancy periods. They can take care of rent collection and their fees are tax deductible. In other words, they make owning a rental property much less of a hassle for you the owner.

Conclusion:

When we start out, we need to do whatever we can to help us pay the bills and try to get ahead. Once you are earning some money you need to try and save what you can so that you can figure out the best way to bring in a passive income stream. With passive income your financial future becomes stabilized, your stress becomes less and you can begin to grow.

Real estate is one of the very best ways to establish a passive income stream. You are protected against the ravages of inflation by simply raising the rent. You can work your passive income stream to take advantage of the tax breaks and offset your income and your investment is backed by a real tangible asset that will never be valued at zero (like stocks potentially can). If it doesn’t work out you can always sell the land. Perhaps best of all you can hire a professional management company to look after your real estate and they will remove all the hassles of ownership.


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