What do you desire the most for 2020? I personally would like a different, more appropriate ending to Game of Thrones. 😛 On a more serious note, it should be to earn more Passive Income. 2020 is the year for increasing your passive income. If it isn’t, you should think about making it! Here is the top 6 ways and areas you can focus on mastering the art of growing rich and getting your financial independence.
Passive income vs Active income
Wikipedia refers to Passive income as income “that requires little to no effort to earn”. I flip Jimbo Wales off in my mind every time I come across this definition. This is not entirely true, passive income does require less work than your regular job. But, that is hardly calling it “little to no effort”. After setting myself up for the 5-to-5-in-12 challenge, I now spend a couple of hours every week on my passive revenue streams. Pruning investments, exploring new areas, planning investment strategy etc.
I would say, active income is your day job. It should take up most of your time. Your active income stream should be stable, carrying low to nil risk. Passive income on the other hand should supplement your active income. Earning passive income should take less time, carries a bit of risk and volatility. As your portfolio grows and as you add more channels of earning money passively, this will gradually overtake your active income. At this point, you have achieved Financial Independence. After this, you are no longer pegged to your job. You can choose retirement if you wish from your day job.
Anyhow, let’s get you started, here are 6 of the best ways for earning a side income you should look at for 2020.
1.) Cashbacks & Rewards
This is a passive income. Trust me, this is a form of income and anyone can do it! I netted over Rs.9,000 from this in November’19. In 2019 alone I have made over Rs.40,000 via cashbacks, rewards and airline miles. As someone’s grandma once said, “A rupee saved,
is a rupee earned is passive income”.
Take this stream seriously. By planning your purchases and availing the discounts available to you, you get to continue enjoy your current standard of living, while spending lesser.
2.) Passive income through Property
Rental income has been around in India for the past 2000 years! Now, off late more avenues have opened up for you to make money out of your property. Here is the list
Additional income through Rent
The usual. Buy the property, rent it out, sip your pina colada while money pours in. Keep in mind that, the money earned from investing in real estate can earn better IRR from several other sources. Nevertheless, there is less risk, and depending on the locality rent can be great.
For 2020, are you availing Tax benefits for home loans? If not, you can consider investing in a property, at a good location, with a reputed builder and rent it. This way you get a tax break on the loan principle and interest. HRA benefits will be available too for your current house. This needs to be declared and taxes paid on the rent received.
Subletting your property as a source of alternate income
Air BnB took the world by storm. Turn your house into a mini vacation stay or hotel and make money off unused rooms. I have a couple of friends in Chennai, Mumbai and Bangalore who do this. Find a good platform such as AirBnB or the several other Indian ones that are available. Rent out a room or two from your house. People will be able to book your room for a fixed period and you will earn rent from that. Overall, the house is yours, you get to enjoy it for a larger period. On the minus side, less privacy and matters of security and safety to be considered.
Few other ideas for income from property worth mentioning
- Rent out your rooftop or front wall for a Billboard or even a telecom tower. Depending on your locality, both pay well.
- Have a huge backyard or garden? Rent it out for tuitions and classes or even events.
- Don’t prefer the AirBnB route? Here is an alternate way for monetizing un-utilized rooms. Rent them out as storage space to friends. We do this in our ancestral house which we barely use. Couple of rooms have been given to people to simply store their junk. It is accessed very rarely, people do not invade your privacy.
3.) Fixed Deposits & Investments
This is my personal favorite. I have a good chunk of my investments in reliable Debt funds. Their exposure to equity and other market factors is far lower than ETFs and other funds. Plus, they are liquid and usually come with no Exit Load penalty. I am currently getting about 9.4% from my Debt fund investments. Here is my November update on what I made from them.
Interest earned from Fixed Deposits
This is some what liquid, safe but the returns are not that good. As of now, the FD rates in India are between 4% to 6.5%. Consider maintaining a FD. The portion of your investments in this should be depending on your risk appetite and age.
So far, in the first half of December, I have investments in Mutual funds that have gone from +28% and -8% and bounced back to 12% rate of return. Depending on your risk appetite choose your allocation of funds (I allocate equally across High, Mid and Small caps). It is best to go the SIP (systematic investment plan) way, where you invest a fixed amount each month (kind of like recurring deposits) into select funds. This way, irrespective of the market being up or down, your investment will average out.
Risky and volatile. Investing in stocks can yield different results depending on how you approach it. If you are day trading, swing trading, prepare to loose your money. This is not for the common passive returns seeker. Algo traders and huge volume traders will take your money in a jiffy. Instead choose fundamentally sound businesses. Companies that grow, are of value and most importantly pay you dividends. These dividends are a great source of passive income that will hit your account every once in a while.
4.) Side Hustles and Income from Online jobs
This century has seen numerours opportunities for you and I to make money from online channels. There is some work involved and you need to have some skills. But all of these are good income earners.
Money from Web development/Programming:
Try Freelancer or Upwork. There are several other websites too. Have I mentioned, I used to make about Rs.20,000 a month during my college days. This is for a couple of weekends of work on WordPress for clients. You can make money over your weekends in several ways:
- building websites
- doing research work
- writing copy or blog posts
- Data entry
Earn money for being creative
Ever heard of Fiverr? Have creative or other viable skills? Head over, you can score gigs for making logos, designing business cards, making videos and music for others. Fiverr is no longer stuck to $5 gigs, you can earn big these days.
Few other ideas for income from online
There are a few other things you can look at:
- Blogging – This is not easily sustainable. Pay is peanuts, if you like writing and have a good niche give it a shot
- Social media management – Plenty of companies and startups look for someone to manage their Social media campaigns, take care of comments and replies.
- Tuitions and Paper corrections – You can easily pick up a side job of teaching someone English or even a local language. My wife was once correcting English papers for non-English students online. All she had to do was read through and correct the grammar, sentence structure etc.
5.) Non-traditional alternate Income Opportunities
In this century, there is a tonne of alternate areas to invest and grow your wealth from. But, that also means there are a tonne of crooks, so be careful where you invest. Always be cautious.
This concept has picked up steam over the past few years. It is quite simple, you have money and are looking for a way to grow your money, someone has a need for your money and is willing to pay a premium (interest). There are a number of platforms such as Faircent, LenDen etc and globally Mintos and Kuetzal
This is a recent idea where a bunch of investors lend for construction of a property or alternately buy a share in the property. You get your returns on the rental income from the property or if the property is sold a fixed % as interest on your funds. There is also REITS (Embassy group has one on the stock exchange). In India there is PropertyShare and further away you have Crowdestate, Bulkestate and Estateguru
Out of the box
Some quirky ones exist too, that end up helping people or the environment while giving you a return:
- Sun exchange – This Africa based startup sets up solar plants in large buildings and schools in Africa and allows you to buy solar cells from them. You are paid back in terms of the energy generated by your cell. I have a couple of solar cells and feel good about it! I get about 11% returns on investment.
- Agrikaab – want to own a camel? Well this start up allows you to buy a camel in Africa. The camel is taken care by a localite and the income generated by the milk from the camel is used to pay you back.
6.) Royalties and revenues
You can put your skills and education to good use and make it earn a recurring income for your retirement.
Monetizing your Creative Assets
- Stock Photography – Great photographer? Have a lot of good photos? Look into signing up with a stock photograph site willing to pay you a royalty. You can try Getty images, Shutterstock and Scopio
- Coursework – PMP expert, Six Sigma, fluent in French, Machine Learning? Sign up to coach or creating course work. Edureka, Udemy and many MOOCs are looking for you
- Writing, music, script writing, advertising, photography, video editing, choreography, event management are all skills which can be monetized to supplement your active income.