Are You Already Earning Passive Income?

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(Edited)

The concept of passive income is something I've been attracted to ever since. The idea of earning money without having to do anything other than waiting for the next payment seemed really tempting to me. In theory, you earned passive income by just putting money into your bank account and earning interest on it. But in a time of negative interest rates, we long have to look elsewhere in order to generate a passive income four ourselves.

In this article, I'm going to first discuss what passive income actually is (and isn't), discuss why you should consider to at least move some of your earnings towards passive income schemes, and then give you some examples of what passive income could look like in order to give you some ideas and show some current investment opportunities to start building your passive income.

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Photo by Sharon McCutcheon

So what is passive income? Fun enough, there's no exact definition at what point income is to be considered passive. The basic idea is that income is passive when you don't have to invest any time or other activity in order to generate it. So by that definition, receiving manual curation rewards from LeoFinance would not be considered a passive income, because you had to invest your time to vote on the articles. Receiving payments for articles you published in the past on Publish0x would be passive income, though. But if you set up an auto-voter, you don't need to invest any more time to reap those curation rewards and on the other hand, you certainly had to invest the time to set up that article in the first place so at what point does it become passive?

As you can see, there are some issues with setting an exact definition. For the matter of the article, though, we'll go with the above - passive income is any income that does not require you to invest any additional time, effort, or money once it has been set up. The much more relevant question is, why should you be interested in setting up passive income in the first place? After all, just looking at the numbers, passive income will generate a lot lower ROI than what you could gain with active investment of both your time and money.

There are a multitude of reasons for that, but the most important one, at least for me, is simply the scope of the investment you are making. Active income is revolving around the here and now, buy Bitcoin when it's low, sell it when it's high. It requires you to invest (huge) portions of your time and, more often than not, also to actively risk your money in the process. To a degree, the latter is obviously also true for passive income, but the scope is completely different for the former. When you set up passive income, you aim to profit from it for as long as possible, IE for life.

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There are some amazing bloggers, like @revisesociology, on LeoFinance, discussing the topic of retiring early, and I'd lie if I'd say that I wouldn't be intrigued by the concept as well. I'm 37 now. Do I really want to work another 30 years? If you want to retire early, there are basically three points of interest for you:

  • How much money do you own
  • How much do you earn each month
  • How much do you need each month

The first bullet point is where active investment comes into place. If you earn more money, you can pay for more months before running out of liquidity. Having enough money available to you is obviously pretty important, but it's only a part of the story. The second bullet point is where we are looking at our regular (passive) income. There's one easy to grasp takeaway here - if your monthly earnings exceed your monthly spending, than you are all good. Now you can earn more on a monthly basis by working as much as you can (or have to) or you can let your past investment of time and money work for you and voila, that's why passive income is so amazing.

If you manage to get your passive income to a point where it earns you more than you need to spend, you have achieved financial freedom. Because now, you wouldn't ever have to worry about earning enough money to make it to next month again. Instead, you could decide yourself what you wanted to do and when. Money would become something that's freely available instead of something you have to think about all the time.

Now achieving that goal doesn't come easy. And don't be fooled, no matter in what country your live, your government certainly does not want you to reach it. But nevertheless, thanks to cryptocurrency, we are living in a time where actually reaching the goal is more realistic for most of us than it has ever been. So like I said in the introduction, I'd love to encourage you to think about how you could work towards that goal. That's not to say stop working on your active income, quite the contrary actually. Strive to earn as much (active) income as you can. But once you've realized some of the earnings, consider investing some of it into creating a steady stream of passive income for yourself!

So now that we've talked about the reasons why you should create passive income for yourself, let's talk about how to actually do it! The most important thing on that matter is some ancient wisdom... don't put everything into one basket. Try to diversify as much as you can. Some of these investments will earn you less than what you had hoped for, some might even disappear completely. But there will be others who should be making up for it. If you only invest in one basket, you risk to loose it all. If you are invested in all kinds of opportunities, chances are your wins will outgrow your losses. Now let's have a look at some of the opportunities Hive has to offer for you.

The most straightforward approach to creating a passive income here would be to delegate your tokens to accounts that provide you with daily/weekly returns for your delegation. There are quite some opportunities like that, so here are just two examples for you. You can delegate your Hive Power to @leo.voter and be paid in LEO for it. That's a great thing to do, as you won't have to try to make the most out of Hive's obscure reward curve that way and still earn some nice rewards.

Another great example is @monster-curator. This one accepts the SPT token in order to vote on Splinterlands content. The only other feasible way to make the most of these tokens would be to set up a dedicated account, stake your SPT and vote with the account daily. By setting up the delegation once, you don't have to worry about all that at all and instead receive daily returns.

Delegations like these are cool and I love using them. They are easy to set up, generate decent returns (25% yearly ROI for @monster-curator for example), and you can get out of them easily as well. The downside to this is that they are bound to the value of their specific token. If SPT loses all its value, these returns won't do me any good. So another great way of generating passive earnings is investing into programs that are explicitly set up to create a passive income for their investors.

There are some examples of that kind of investment just getting started on LeoFinance right now. Just today, we expect to see the start of the LBI token. LBI stands for Leo backed investment. In short, you buy into the scheme by buying the corresponding LBI tokens for Hive and afterwards receive a regular dividend on your investment. The core difference here is that this investment is not restricted to LEO or any other single token. Instead, the investments will be spread out across different currencies and tokens, thus reducing the risk of a complete loss of investment.

Another great example is YIELDBONDA, which basically does the same thing but specializes in yield farming on the Ethereum blockchain, promising a 15% yearly ROI. The reason I like this offer especially is that it allows me to invest in an area that I deem rather profitable but that always felt too complicated for me to interact with. This way, I can further diversify my portfolio without having to ever handle the nuances myself.

One more opportunity to create passive income is blockchain gaming, fun enough. Thanks to the brilliant peakmonsters, you can rent out cards you own in Splinterlands to other players and earn a daily (passive) income on your cards. This is a feature I'm really excited about and one I invested quite some money into. They just recently had a presale for a coming expansion and I invested 7,500$ into acquiring some NFTs (called land) with the purpose to create a passive income with these. Once the expansion hits, I'll start to rent out parts of my land to other players in order to generate a daily return on it.

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There are many more opportunities like these on and off the Hive blockchain and I can only encourage you to look into these and start to build up your passive income yourself. As I said above, the scope of this is long term. Don't expect to retire from these earnings next month or next year. But take the time to do the math for yourself. How much would you need to earn per month in order to achieve financial freedom? How long would it take you to get there and what would need to happen to help you get there?

I firmly believe that achieving financial freedom is possible for each of us. It won't come free to you, it's probably a lot of work and it certainly just needs that bit of luck to all come together. For me personally, my goal is to have everything set up by 2030. By then, I'd be 47 and that would mean I would retire 20 years earlier than I would normally. We'll see if it all works out in the end, but I'm certainly willing to give it my best in order to get there!

That's all from me today, thank you all for reading and please let me know what you think on the topic. Did you already create passive income for you? Are you going to do so in the future? See you all next time!

Posted Using LeoFinance Beta



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18 comments
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@tipu curate

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what an amazing post! For now i earn passive income only through some tokens but still, the amount i earn is just a bit

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Every little bit helps. And the tiny tokens you earn today could be worth a small fortune in 5 or 10 years!

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Automated Curation will going to be a nice earnings.

But I still do not delegate to monster voter, because I feel to keep my VP to myself .
It generally go to waste but you will be surprised that one day I got 157 SPT as curation rewards for my 6 SPT vote because monster curator upvoted it after me.

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Ha that's pretty nice - guess you could try to always vote good Splinterlands content before he does for some nice returns. But again, that would be too much effort for my taste ;-)

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