We all love making money. It’s our life’s goal. There’s no better pleasure than making money and counting it. Making money is easy when you are young and strong. You go to work, earn money and it gets spent in no time. No problem…you can always earn some more money, which also gets spent in no time. When you make money its only enjoyment….fun…pleasure. Life’s such a joy. It seems the good times will never end. But, all good things come to an end. Have you thought of the day when you may not be able to make money? What will you do then?
Planning for tough times starts in good times. It’s too late to start planning when the money stops. Why not use the money you make today to build an asset or make an investment, which earns for you, when you cannot make money? Don’t just make money. Give this money a path to grow and it will support you, when you need it the most.
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You have different ways to make money. You may earn money from your salary. You might have agricultural land where you grow food or commercial crops, giving you agricultural income. You might own a car which you give on rent or you earn money by renting out your house.
The key is not how much money you earn, but how much you save and invest. The money you save and invest helps you in bad times. Your motto: Don’t just make money. Also give it a path to grow.
Warren Buffett says, “Never depend on single income. Make investment to create a second source.” An investment in a house not only gives you a roof over your head, it also gives you income throughout your life. Cannot afford a house? Avail a home loan and buy it. If you are young and just started working, you may not be able to afford a house. Availing a home loan helps you own a house at a young age.
Why buy a house? Simple….you can always rent it and earn rental income. This money can support you in bad times.Retired with no money? No Problem. Your house can support you in old age if you are above 60. Just avail reverse mortgage, where you pledge your house with the bank. The bank gives you money, either as a lump sum or in installments.You can use this money even for a medical emergency as hospitalization can be very costly in old age.
Buying a house is not just a roof over your head. It’s an asset which can support you across your life.
New Pension Scheme popularly called NPS, can be an excellent source of passive income. A maximum of 50% of the money you invest in NPS is invested in equity (equity mutual funds + stocks). The rest of the money is invested in a mix of Government and Corporate bonds (Company Bonds). NPS invests your money in equity, which is known to give good returns over the long term.An investment in equity is risky, but if you stay invested for the long term, this investment is quite safe. NPS forces you to stay invested till maturity (retirement). This gives a good chance for your money to grow.
How does NPS give you a passive income? You can withdraw 60% of the NPS Corpus (Money accumulated in your NPS account), only at maturity. You have to compulsorily invest the remaining 40% in an annuity plan.
Annuity is nothing but an insurance product, which gives you regular income after retirement. Your investment in the annuity plan gives you payments at a future date (after retirement say once each month or year). This passive income can support you in retirement. NPS is a great way to earn passive income.You enjoy tax benefits and your money grows. When you retire, the money you get from the annuity plan supports you.
Don’t know how to earn passive income? Simply invest your money in a bank fixed deposit.Your money is safe and you earn interest on the money you invest. The bank pays you interest on your fixed deposit each year and this interest income is called passive income.
Need money for an emergency? The interest income you earn from the fixed deposit can support you. If you lose your job, you and your family can live on this money for several months.Many families in India have been saved by the humble fixed deposit. This is one of the excellent sources of passive income.
Public provident fund also called PPF, is a popular investment, backed by the Government of India. You can invest in a PPF through a Nationalized Bank, few private sector banks and Post Offices. PPF has a lock in of 15 years which makes sure that you create a corpus over this long period. You cannot touch your money for this time period.
Why PPF is an excellent investment? The interest rate offered on PPF, is much higher than bank fixed deposits, NSC and Post Office deposits. PPF gives returns much higher than inflation and interest earned is tax free as well. . How PPF gives you a passive income? PPF forces you to stay invested for 15 years. The interest you earn is reinvested and this boosts your earnings/returns.You withdraw from the PPF at maturity and keep some money aside for your needs. You invest the rest of the money in an annuity scheme. This scheme gives you a regular income after retirement.
PPF is an excellent investment which gives returns more than bank fixed deposits and post office deposits. You also enjoy tax benefits. You get returns much more than inflation. You can invest your earnings from PPF in an annuity plan and enjoy a happy retirement.
You are a farmer owning agricultural land? You have a great way to earn passive income. Let’s say you grow food grains or pulses or even cash crops on your agricultural land. This income you earn is agricultural income and is not taxed.This gives you a head start over most citizens, when it comes to saving and investing. You must invest your earnings to buy more agricultural land. You can lease this land to other farmers and earn income.
You can also look towards agricultural asset management services to earn passive income. If you own agricultural land, these firms use your land to grow commercial crops using scientific techniques to maximize crop yield. The firm then hires farmers (contract farming), who grow crops on the land. You are given the best possible returns by the agricultural asset management firm. Agricultural asset management firms are an excellent way to earn passive income. They give high return on investment and tax free income.
What use is making money, if there is no money when you need it the most? You want your money to work for you? Make sure it grows. To grow money, you need to give it a path. This path is passive income. Your money invested wisely, builds assets and earns you income throughout your life. Be Wise, Get Rich.
Mr C.S.Sudheer is a management graduate. He started his career with ICICI Prudential Life Insurance and later on worked with Howden India. After his brief stint in Howden India, he moved on and incorporated Suvision Holdings Pvt Ltd which is the sole promoter of IndianMoney.com. He aims to build a nation that is financially literate with investment savvy citizens.
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