Passive Income And It’s Benefits

Passive income and it’s benefits 1

What is passive income?

Even today a lot of people don’t really know the in depth meaning of passive income. If they had any clue about this, we wouldn’t see these young people spending everything they earn. Well passive income is defined as any incoming that is being generated with minimal or no work at all. Sounds funny is it? Well if someone who works hard from morning to night for money, hears about making money without any work, it will indeed sound funny to them. But the real truth that there is a thing called passive income and it is very much possible for anyone to generate such. Passive income is best when it adds on to your active income and make the total income figure look huge.

Most Important Requirement For Passive Income

Have you wondered, what exactly is the most important requirement for generating passive income? Well it is active income. Confused? Let me tell you, if you have no active income, you cannot make passive income that I’m going to talk about in this article. It is the active income, from where you cut out some money and put it to work on generating passive income.

What to do to start generating passive income?

You can start the procedure of making passive money by starting to save money off your active income. By saving I do not mean to put it in your savings account and wait for it to get bigger and then you can spend them all on something big. By saving I mean investing your money into direct equities or Mutual Funds/ULIPs. I would personally go for Maximiser Funds(ULIPS) when starting out. The whole idea is, to start a monthly investment plan (SIP) and start seeing your savings grow bigger.

Facts and Figures (Pure Assumption)

Let us assume that you earn Rs. 30,000 per month. Around Rs. 15,000 per month is your most minimum expenses, that is paying the necessary bills and rentals and you keep around 5,000 more for personal expenses like shopping, dining etc. Now you have around 10,000 per month extra which you can save. We’ll assume that you are putting those 10,000 into a monthly investment plan (Maximiser Fund). Most maximiser funds will give at least 15-20% returns annually for sure, that is if you check out at the correct time when market is at its highs. The investment amount also grows compounded here. We will assume a 15% return annually on an average.

Year 1 : –

  • Investment Value – 1,20,000
  • Final Value – 1,38,000
  • Profit – 13,000
  • Monthly Income – 31,000

Year 2 : –

  • Investment Value – 2,40,000
  • Final Value – 2,96,700
  • Profit – 38,700
  • Monthly Income – 33,225

Year 3 : –

  • Investment Value – 3,60,000
  • Final Value – 4,79,205
  • Profit – 62,205
  • Monthly Income – 35,200

Year 4 : –

  • Investment Value – 4,80,000
  • Final Value – 6,89,086
  • Profit – 90,000
  • Monthly Income – 37,500

Year 5 : –

  • Investment Value – 6,00,000
  • Final Value – 9,30,450
  • Profit – 1,21,365
  • Monthly Income – 40,100

Year 10 : –

  • Invested Value – 12,00,000
  • Final Value – 28,00,000
  • Profit – 3,63,500
  • Monthly Income – 60,000

So you can figure out from above that how we boosted the monthly income from mere 30,000 per month to almost 60,000 per month at the end of 10 years and you even have a total saving of around 28 lakh. You must have got the idea how the money grows year by year. It is very less at the end of first few years but increases drastically later on. Can you imagine the figures at the end of 20 years? I shall leave you to do the calculations yourself. After 10 years, you can even stop saving anything because you’ll notice that 10k amount per month will hardly make a difference to your passive income. You will have so much money saved that you will not need to save anything from your active income and yet continue to make massive amounts of passive income.

Also see that here you only saved 10,000 a month, what if you have a chance to save 20,000 or 30,000 a month? Sounds crazy isn’t it? So are you going to start saving from today?