in Trader University

Financial Freedom Series 1 : What is Passive Income???

Passive incomeĀ  = Income which is generated from an asset which you have created long ago and reaping its benefits now.

Example – You own a flat in a metro city. You put it on rent and go home. That way you generate passive income without even doing anything.

I generate a part of my income passively. Its a website I started in college years ago, I actively worked on it, made money and then joined a job. To this day, that website makes some money. The numbers have fallen but it hasn’t stopped.

How does it feel? It feels good. Firstly, its a backup avenue which helps me lead a tension free life. I do not have to depend on a job for my survival. If I dont like something, I can quit very very easily since the passive income buys me time.

Secondly, you make smart choices. For example, you use a portion of that money and cycle it back into the system so that the system expands its diameter. So let’s say if my website earns me X, I would invest X/2 in the website itself so that the website keeps it momentum.

With the rest of the X/2, I would experiment quite aggressively. For example, just last month I invested in a stock. That stock can fail. Doesn’t make any difference to my lifestyle since that income has been generated passively and I am not depending on that at this very moment. It helps me take more risks and explore into the unknown.

There is a saying in Hindi – “Lakshmi chanchala hoti hai” (The goddess of wealth is very curious). and that “Lakshmi ko kabhie band karke mat rakho, lakhshmi rooth jati hai (Money should always be in circulation). “Lakshmi jayegi, phir ayegi, phir jayegi…darwaza khula rakho, usko jaane do. Aaj jayegi to kal ghum fir ke tumhare hi god mein aayegi”

One advise as per Warren Buffet