Most people worry about having enough money to fund their day-to-day expenses, let alone their goals for the future. If this applies to your situation—and if you’re particularly anxious about having enough money for goals like further education, travel, or retirement—you may be unsatisfied with how much you’re saving from your monthly income alone. As the old saying goes, money doesn’t grow on trees, although you probably wish that were the case with how expensive the cost of living has become.
But there’s an alternative to depending only on your basic income, and that’s to explore passive income options. Passive income pertains to your earnings from a source other than your regular income as an employee or employer. It may seem like an added burden at first, but try weighing your options and seeing if there’s a passive income arrangement that can suit your lifestyle and financial situation. From mutual funds to real estate to UITF Philippines options, here’s a briefer on the best investment options you can make to generate passive income courtesy of Robinsons Bank.
What Are the Benefits of Generating Passive Income?
First, let’s examine why it’s a good idea to pursue passive income in addition to your regular income. The effort to invest additional time, money, and energy into creating passive income for yourself and your family will be worth it for the following reasons:
You’ll Increase Your Baseline Financial Stability
Put simply, when you successfully build on your passive income, you increase your overall financial stability. That means worrying less about stretching the value of your paycheck and not having to make as many hard choices about which of your expenses you should prioritize.
You’ll Build Wealth for a Rainy Day
You may not see the need to have extra money right now when things seem comfortable. But you may think differently in the farther future, i.e. when you get older when you become responsible for more people, and when emergencies that pertain to illness or injury occur more frequently. In hard times, you’ll be glad you earned extra passive income to tide you over.
You’ll Learn More about How to Manage Your Finances
Learning about how to generate passive income and how to manage it in sustainable ways will also level up your financial abilities. Even if you’re not naturally inclined towards numbers, you’ll find yourself becoming more financially literate and more confident in your financial decision-making.
You’ll Have Extra Money to Meet Particular Life Goals
It may be hard to fund your travel plans, your education, or your desire to retire early if you depend only on your regular income. But if you’re purposeful about earning and saving the extra money, it will be easier than you thought to attain these dreams for yourself.
You Can Share Your Generosity with Others
You aren’t the only person who stands to benefit from your passive income. Having more money in the bank from your passive income streams also means that you can be more generous with your loved ones and with people who are in need. It may be even more rewarding to earn extra income if you know that you can use it to support a family member or to donate to a good cause.
The Top 9 Passive Income Investment Options That You Should Try
There are several passive income options that you can explore, particularly via legitimate investment. Here are the nine best options for people who want to build their passive income, but who also want to make the most out of their limited time:
High-Yield Savings Accounts
One of the safest, easiest, and most effortless ways to build passive income is to enroll in a high-yield savings account. High-yield savings accounts, like the time deposit accounts offered by Robinsons Bank, will allow you to simply deposit your money and leave it alone for a predetermined period so that it can accrue interest. The more you deposit and the longer you go without touching your money, the higher your total passive income.
Mutual Funds
A mutual fund is a collective investment scheme where money is pooled by multiple investors into a portfolio of securities like bonds, equities, and money market instruments. These funds are overseen by professional money managers whom investors pay an annual fee and, depending on the arrangement, commissions for certain amounts earned or certain investment objectives met. This is an appealing investment option for passive income because it allows you to make money from a diversified collection of assets, instead of relying on the returns for only one type.
Unit Investment Trust Funds (UITFs)
Another collective investment scheme that’s similar to a mutual fund is a unit investment trust fund (UITF). In this arrangement, you allow a trustee bank to invest your money into a portfolio containing various assets. Your banking provider’s financial expertise and a wide network of investment partners are good reasons to entrust them with your UITF. They may be in the best position to manage your assets and advise you on which securities will be the best sources of passive income.
Variable Universal Life (VUL) Insurance
Variable life insurance, or VUL, simply consists of life insurance plus some extra. The “variable” part in the term “variable life insurance” pertains to investment returns that are tied to the rise and fall of the involved markets. In a nutshell, VUL policies bundle traditional death benefits with extra investment options, typically ones that work like mutual funds. They are an easy and sensible investment option for those who already want or have life insurance. With this arrangement, not only do you stand to earn a significant amount of passive income; but if you live beyond the terms stipulated in your policy, you can withdraw the cash value in full or even get an amount of money that exceeds it.
Dividend-Earning Stocks
You can also check out stocks that pay out dividends, or token rewards, to company shareholders when the said company does well. The higher the company’s earnings, the more dividends its shareholders receive. You can choose to withdraw some passive income from the cash dividends, or you can reinvest the dividends to compound your earnings and earn even more over time.
Treasury Bonds
Treasury bonds are debt securities that are backed by the government, which is one of the safest and least volatile institutions you can invest your money in. Depending on which arrangement you choose, your bond can hit maturity after five, ten, or twenty years, and it may also allow you to collect interest on a monthly, quarterly, or semiannual basis. Although it takes a long time to earn back from a treasury bond, this type of investment is often quite stable, and it comes with higher rates of return compared to other fixed-income securities.
Real Estate
If you have the money to make the initial investment in properties, real estate will be a particularly lucrative option for earning passive income. You’ll be able to earn money on rentals or on the future sale of your properties as their values increase. Just be forewarned that compared to the others in this list, real estate is not the kind of passive income option that you can sleep on after you make it. For the investment to be successful, you will need to set aside a lot of money as well as dedicate time and attention to managing your tenants.
Peer-to-Peer Lending
Yet another option for you to explore if you’ve got money to spare is peer-to-peer (P2P) lending. Find a reputable P2P platform and lend money to individuals who need to borrow it. Then, you’ll be able to earn passive income on the interest you get from repayments. This is a highly customizable passive income option that also comes with a personal touch. You can choose how much money you can afford to lend, and you can also choose to back particular people or causes that you believe in.
Passive Income from Cooperatives
You may also be able to earn passive income from your investment in an industry cooperative, for example, one whose members are involved in agriculture. Some industry cooperatives actually pay dividends to members based on their collective profit. It will be a viable income stream option if you join a cooperative that offers dividends on its success, and you stand to get additional perks like exclusive member discounts on services or products offered by other members.
What Should You Know Before Choosing to Make Passive Income?
Before you start your foray into investments for passive income, here are a few things that you should keep in mind:
- A successful investment is one that helps you meet specific financial goals. These vary from person to person. Make sure that your investment journey has some direction by determining your financial goals and deciding which of these will be fulfilled with the help of your passive income.
- Next, set a benchmark for how much money you’d like to earn from your passive income streams. You can shoot for a specific amount, or you can aim to earn a certain percentage of your regular income.
- You should also decide how much assistance you’ll need at managing your passive income investments. Some of the options detailed above require more input from experts than others. Base your decision not only on your current financial abilities but also on what you can currently afford.
- There are a lot of passive income options being offered in the market, but not all of them are legitimate. When deciding which option you want to partake in, remember to be wary of passive income scams and get-rich-quick schemes. As they often say, if it’s good to be true, then it likely is. Protect your hard-earned money by making sure it goes into legitimate investment vehicles, managed by trustworthy people.
Great things are in store for those who can earn enough passive income to fund their personal goals. Browse through Robinsons Bank’s website and find personal banking and investment and fund management products that can help you build your personal wealth!