It’s finally 2021, and with a new year come new opportunities and resolutions to make for the year ahead. Some of the most common New Year’s resolutions involve money, exercise, and nutrition, and, especially after the economic turmoil that characterized 2020, you’re likely not alone if you’re focusing on improving your financial situation first. After all, with 63 percent of Americans living paycheck-to-paycheck as a result of the COVID-19 pandemic, you’ve got a two-thirds chance of having your financial situation personally impacted by the coronavirus.
One of the best ways to super-charge your personal finances comes from finding ways to make passive income. The idea behind passive income is simple: you set up a mechanism for generating income that requires little to no maintenance on your part and, after it’s launched, gets to start reaping the benefits. The two most common forms of generating passive income are passive business strategies and making passive investments. Read on for more information about both of these concepts, as well as what sorts of legal regulations are in play when you’re pursuing different ways to increase your income.
What should you know if you’re generating passive income from a business?
Generating passive income from a business may sound a bit confusing at first. After all, to run a business, you have to work, which involves active and sustained effort. However, depending on the sorts of business ideas you choose, generating passive income could still be possible even as you’re “running” a business on paper. For example, if you write an eBook or create some witty t-shirt designs that are completely fulfilled through dropshipping, the only work you have to do is get the word out about your product. As such, you could automate your marketing campaigns and still make money without even lifting a finger, waking up to sales reports each morning.
Another source of passive income is owning a rental property. While it’s true that you may need to spend some money on maintenance workers, rental income is passive. Of course, if you’re running a business, there may be some legal regulations involved in how you file for taxes and whether or not you need to register as a business entity. As a result, it’s a good idea to find a lawyer specializing in complex litigation or corporate law. If you’re a landlord, you may even want to find an attorney like Malliha Wilson, who can provide you with appropriate legal counsel. Any time you’re unsure about something’s legal ramifications, it’s a good idea to consult an attorney to understand your rights and responsibilities fully.
What sorts of platforms can help you get ahead as a passive investor?
Another way to generate passive income is through passive investment strategies. Investing in the stock market or alternative investment vehicles can be a great way to increase your net worth with minimal effort. This is because, thanks to the power of compound interest and the fact that the market returns, on average, 8 to 9 percent each year, you can make a lot of money just by maintaining a steady rate of investment.
There are various strategies to consider when it comes to passive investments, so it’s a good idea to read up on the regulations and limitations of each asset class before you make a choice. Picking the right platform, brokerage, and asset classes can all help you maximize your passive investments by ensuring that they’re appropriately allocated to help you meet your goals. Like other investing strategies, it’s a good idea to chat with a financial planner or tax advisor before you start your investment strategy.