Financial planner Eric Roberge says passive income exists but is not easy or accessible to everyone. It requires upfront effort and time. According to Roberge, there are three realistic ways to build passive income.
First, you can build a strong investment portfolio. By contributing to investments during your working years, you can create a portfolio of assets that eventually provides a livable income. With a well-diversified and strategically managed portfolio, you can buy assets now that will increase in value over time.
In the future, you can convert these higher-valued assets back to cash or receive income via dividends. Second, you can start a business or invest in one. Creating passive income through a business requires building a venture that can operate without your active involvement.
Realistic ways to achieve passive income
By hiring employees who deliver the service or create the product, you retain ownership and part of the profit without being directly involved in the daily operations. An alternative is investing in an existing business, where you gain an ownership stake in exchange for a portion of revenues.
Third, you can leverage your current work for future royalties. Selling the rights to valuable assets, such as intellectual property or creative work, can establish a passive income stream. This could include publishing books, creating courses, or selling a process that a business might implement.
Although this method involves a significant upfront effort to create the initial asset, it can lead to recurring future income in royalties. Roberge says that while passive income is achievable, it’s important to focus on wisely managing the income you actively earn rather than spending time and money chasing potentially elusive income streams. “Passive income does exist, but it’s not accessible to everyone and requires upfront effort and time,” Roberge said.
“By building a strong investment portfolio, starting or investing in a business, or leveraging your current work for future royalties, you can work towards creating a sustainable and realistic passive income.”
