Money is one of the most important things in life if not the most important. Everybody tries to make additional income over and above their main income. The money you make from your job or business is your active income because you need to work for that every day. The income you earn without working everyday, which is over and above your main income, is called your passive income. If you have rented your house or have invested money somewhere, the income from those sources is your passive income. This is handy money that you can use for a better life. Let us see some ways to make wise use of passive income.
Types of passive income
There are many income sources that can be considered as passive income sources. Any income besides your job is passive income. Even if you win a lottery, it would be considered as a passive income. The very basic passive income is what you make through interest from your bank. If you own a property and rent it then the income will be passive income. Capital income from investments, income from insurance policies among others are examples of passive income.
Create an emergency fund
You never know what turn life takes at which point in time. An accident or illness can shatter you mentally, physically and financially. Building an emergency fund for these situations is excellent use of passive income. If your family runs smoothly with your regular income then you can consider your passive income as your savings option. The emergency fund will secure your and your family’s future.
Child’s future education
If your child decides to study in the best college of the country in future, what will you do? It is always better to start planning from today than to compromise tomorrow. Use your passive income to build an education fund for your child’s future.
Your passive income can be reinvested for growing it into more passive income. Passive income allows you to take a little more risk with investments which thereby enable you to make better gains. Take calculated risks and invest well.