You might currently be holding a full time job and drawing a stable monthly salary. But what if you are able to earn passive income without actually having to forsake your full time job?
Passive income is income earned without necessarily having to put in the effort of normal working hours. It is usually additional to any income earned on a full time job. In Singapore, those who seek to earn passive income usually do it for some of the following reasons:
- It gives a good accumulation of wealth which can be used during retirement: Many Singaporeans struggle with financial difficulty during their retirement years. The money received on pension is rarely enough, therefore, earning some passive income over the productive years becomes very useful during sunset years.
- Can go a very long way in helping to pay off debts: This is can a great relief, especially where there are default fees being charged. The passive income will help to reduce the pressure that comes with debt repayments and also help to improve the credit rating of the borrower.
- Generating a passive income is a way of growing financially: It is actually one route to financial stability in the long run. Many Singaporeans would love to reach a state where they have enough financial investments to actually retire early. Having a passive income can provide this opportunity.
There are some popular ways of earning a passive income in Singapore. Five of these ways are given below:
1. Investment In Real Estate
Investing in real estate is one way of earning some extra income. It should be noted that this particular source of income will require plenty of patience.
You will first need to source for the initial capital to purchase the property. This could easily be a very costly affair. However, the property should be put up for rent immediately so as to generate sufficient funds to cover the repayments required for the initial capital as well as generate a profit.
There will be other costs incurred such as agent fees and maintenance costs of the property. The rental income should be sufficient to cover all costs as well as give a surplus which can accumulate as a passive income.
2. Investment In Bonds
If you’re afraid of taking risks, this is one investment which is considered relatively safe.
Bonds tend to yield a fixed income and you are also guaranteed to get the face value of the bond when it matures. Government bonds are considered to be less risky than corporate bonds.
In the case of liquidation of a company, the holders of bonds will be given priority in payment before shareholders. Bonds are a reliable source of passive income. However, it should be noted that the rates of interest tend to be low because the element of risk is also low. In spite of this drawback, over the long term, a bond holder will benefit from a reliable source of extra income.
3. Investment In Stocks
This is a very common source of passive income in Singapore.
If you are looking to invest in stocks, you need to be careful about where you invest. Those who have invested in the right stocks have enjoyed the benefit of having the income of good annual dividends.
However, this kind of investment needs to be allowed to grow over time so that there can be a real accumulation of wealth. Many Singaporeans prefer to invest in the shares of several different companies to spread the risk and minimize on losses. Stocks generally carry a higher risk than bonds, because in cases where the company makes losses, the shareholders end up without any dividend income.
These are policies where the insurance company pays the policy holder a regular fixed amount during retirement years. For the income to be substantial, it is advisable that the policy be maintained consistently for several years.
Those who choose this type of investment in their youth usually enjoy the benefit of having a regular income in their old age.
5. Lending On A Peer-To-Peer Basis
There are many small businesses or startups in Singapore that are not eligible to get credit from banks or any other financial institutions. Those who lend funds to these businesses tend to make a passive income from the interest that they charge.
It should be noted that there is a risk involved because it is difficult to determine the credibility of these borrowers. The fact that they are unable to borrow from banks means they are high risk. You to do a thorough background check before extending credit to any client. The interest charged on this type of credit is normally higher than that of banks, therefore, if this lending is done with the necessary caution, it can be a good source of passive income.
Having a passive income is a great way to achieve financial growth and stability. Thinking of earning passive income to achieve your long-term goals? You can begin with the above 5 points!