The legendary investor, Warren Buffett rightly said that if you cannot create a second source of income by the age of 45, then you have really done injustice to yourself. If you are in business or if you are an independent consultant there are multiple streams that you can consider. But what if you are employed and your existing contract does not allow you to take up other work? Also, your pressures at your workplace may be tight enough to leave you with little spare time to worry about how to create a second stream of income. That is when you have to make money work hard for you. Let us look at two such approaches.
Affiliate and referral marketing involves driving sales for another business which then pays you a commission for each sale it acquires through your efforts. The Amazon Associates affiliate marketing program is one of the best options for people looking to earn money this way. You need set up a website with outbound links redirecting to products on Amazon (or another site that offers affiliate programs) and if a visitor from your site buys the product, then that business pays you a share of the amount spent.
From Median Income Thresholds to Personal Income StatementsLooking at overall population statistics in recent years, the Census Bureau has reported median annual household income around $44,334. Moving our focus to retirement, a 2005 Congressional Research Service report (Topics in Aging: Income and Poverty Among Older Americans in 2004, by Debra Whitman and Patrick Purcell) provides data suggesting median annual inflows into the personal income statements of current retirees (age 65 and above) were as follows:o Income from human capital –Wages: $15,000o Income from social capital –Private defined benefit plans: $6,720 –Public defined benefit plans: $15,600 –Social Security: $10,399o Income from financial capital –Annual income: $952
Though the guilds flourished during the times of the Buddhist scriptures, we get faint references to their existence even during the Vedic period in the Vedic literature. These guilds mainly existed in important towns of India and embraced almost all trades and industries. It shall be desirable to have an idea about the organisation and functions of the guilds.
The primary philosophy behind the residual income model is that the portion of a stock's price that is above or below book value is attributable to the expertise of the company's management. Accordingly, it becomes a handy tool for calculating what the "real" value of a stock is. It is important to note, however, that analysts should pay special attention to incorporating changes in book value per share caused by share buybacks and other unusual events that may distort the analysis.
Let’s say a company earns $1 a share and pays out 75 cents in the form of a dividend. That’s a 75% dividend payout ratio. Let’s say the next year the company earns $2 a share and pays out $1 in the form of dividends. Although the dividend payout ratio declines to 50%, due the company wanting to spend more CAPEX on expansion, at least the absolute dividend amount increases.
Passive income is defined by Wikipedia as “income resulting from cash flow received on a regular basis, requiring minimal to no effort by the recipient to maintain it”. And while the ‘no effort’ part of the definition is very enticing, the truth is that generating passive income requires a massive amount of effort. And this effort needs to be exerted up front and then sustained for months, and maybe even years, until your venture starts returning profits. And even then, you'll have to monitor your income streams to make sure it’s all going smoothly. It's certainly not an easy endeavour, no matter what most people may tell you, and it requires an investment of something far more valuable than money: time. But if you are up for it, then here are 14 ideas that you can use to start earning passive income.
I think the holy grail of financial freedom is having so many passive income. This way you will never worry about your financial needs because everything is taken care of your assets. You will have all the your time in the world and visit all places you dream about. You have your time and money. This is the dream of most people which only few ever achieved.
It’s obvious that stocks outperform real estate in terms of capital gains, but I would like to see S&P compare to Real Estate in SF, Manhattan, LA. Our house in NC was $80,000 20 years ago. It’s only $150,000 now. Same house in Santa Monica went from $200,000 to $1.8 million. People who happen to bought real estate in major metropolitan would have a natural positive association with real estate investment.
Most of the time, when you invest in bonds, you have to pay federal, state and/or local tax on the yield you earn. However, when you earn money from municipal bonds, the proceeds are usually tax-free at the federal level and also tax-free at the state level if you live in the same state in which the bonds were issued. This tax exemption applies whether you invest in individual municipal bonds or purchase them through a municipal bond fund.
3. Do the RI and DCF approaches yield identical ﬁrm value estimates in practice?Bernard (1995), employing only the ﬁrst 4 yr of forecast data, ﬁnds that the RIapproach explains 68 per cent of a ﬁrm’s stock price, while the DDM explains only29 per cent. Using a slightly diﬀerent approach, Plenborg (1999) ﬁnds similar resultswhen comparing the information content of earnings and cash ﬂows. On the basis ofDanish data, Plenborg ﬁnds that four years of accumulated earnings explains 22 percent of the stock price variation in the same measurement period. In comparison,accumulated free cash ﬂows explain less than 1 per cent of the stock price variationin the same four-year period. The results of both Bernard and Plenborg indicate thatthe required forecast period is shorter for the RI approach than for the DDM/DCFapproach.Penman and Sougiannis (1998) and Francis et al. (2000) compare the reliability ofﬁrm value estimates based on the DDM, RI and DCF approaches, respectively.Although both studies use US data, a primary diﬀerence between them is that theforecast data are determined diﬀerently. Francis et al. use Value Line’s forecast datawhile Penman and Sougiannis apply realised data as estimates of historicalforecasts.8Despite the diﬀerent sources of forecast data, both studies show thatthe RI approach yields less biased ﬁrm value estimates than the DDM and the DCFapproaches. This result is insensitive to diﬀerent methods for calculating the terminalvalue. However, the RI approach did not perform particularly well when terminalvalue calculations are important. This is the case when the book value of equity is abad indicator of ﬁrm value.The Penman and Sougiannis (1998) and Francis et al. (2000) studies suggest thatthe RI approach yields more accurate ﬁrm estimates than the DDM and the DCFapproaches. However, their ﬁndings conﬂict with the ﬁnding in Section 2 that the RIand DCF approaches are both inherently based on the DDM and thus, from atheoretical perspective, should yield the same ﬁrm value estimates. Plenborg (2000)also ﬁnds that the three valuation approaches generate the same point estimate ofﬁrm value in practice, if the same assumptions are applied. This indicates that neitherPenman and Sougiannis nor Francis et al. have taken into account that the sameassumptions must be applied. An examination of their test methods also indicatesthat this is the case. For example, the growth rates used to estimate the terminalvalue are arbitrarily set at 0 and 4 per cent in both studies. Thus, the link between theforecasted ﬁnancial statements and the input in the diﬀerent valuation approaches ismost likely inconsistent. Further, both studies seem to ignore that growth generallyaﬀects the free cash ﬂow negatively. They adjust the growth rate without acorresponding adjustment of the free cash ﬂow. Finally, the DCF approachmeasures ﬁrm value from a combined equity-holder and lender perspective, while theRI approach measures ﬁrm value from an equity-holder’s perspective only. Asshown by Damodaran (1994, p. 146), the growth rate does not have to be identical inthe two valuation approaches due to the eﬀect of leverage.8Penman and Sougiannis (1998, p. 354) discuss the advantages and disadvantages of these twoforecasting methods.T. Plenborg / Scand. J. Mgmt. 18 (2002) 303–318 307
Those are the different sources of income for our household in 2015. It’s good to have a solid earned income, but you need investment income to become wealthy. The key is to save a significant percentage of your income and invest consistenly. This will create different streams of investment income which will compound over time. If you make a lot of earned income, but don’t have much investment income, then there might be a problem. This probably means you spend most of it and aren’t investing enough. That’s not good because earned income do not last. We all get old sometime and you can’t work forever.
Unfortunately, I can’t answer that conclusively one way or the other. It all depends on you, what you like to do, your work ethic, personality, etc. If you are a good writer perhaps you could write a book and make money that way. Or, you could start your own website and do affiliate marketing. Just because you are young it doesn’t mean you can’t make money doing at least a few of these ideas. I wish you luck in your money making efforts!