Passive Income 101: Here’s How I Pay My Bills With It

Passive income pays for my electricity, wifi, water and mobile bills without me working. How? With investing!

Okay, so I do work full-time because I still need to pay rent, buy $25 cocktails and contribute to my investment portfolio. However, as a lazy 20-something girl – I love passive income. Earning money while doing nothing is the best.

What is passive income?

Passive income refers to income that requires little work to maintain it.

In contrast, active income is one that requires a large time investment. Your full-time job for example, would be considered active income. The reason passive income is excellent is it allows you to earn more money, while investing less of your time. This means your ability to create an income is not based on the hours of your labour but rather the performance of your investments. Also, active income has a ceiling. There’s only so much money you can make based on your labour, alone – we are capped at a certain amount of hours per week. However, with investing we can scale the scope of our income substantially. Also, I’m lazy. I want to work less and rest more!

You can read more about passive income here.

How to make my passive income? Is this a scam or MLM?

People are always a bit suss when I mention passive income. And, I get it.

It’s a term that is being used by MLMs and weird scams which can put people off actual passive income. There are many legitimate ways to make a such an income. However, many of the common methods such as being a landlord and collecting rental income requires substantial capital upfront.

As I didn’t have this much money, investing a percentage of my income into the stock market every month made the most sense. For me personally, I made my money primarily off dividends and distributions from my stock market investment portfolio. I also make some bank interest which is where I store my emergency fund.

Here’s the thing, it’s no magic secret to getting rich. But, it’s a great way to boost your current income and over time, investing can be incredibly powerful.

I know what you’re thinking.

“Money Marketer. You’ve been investing for the last 6 years. Shouldn’t you have a bigger passive income stream?”

Yes, yes I should. As a long-term investor, I primarily focus on growth. This means I purchase investments that are likely to gain value in the future rather than ones that will pay me a larger dividend. I do this so I can make more money. Many of my individual stocks and commodities do not even pay a dividend. If I focused on high-dividend stocks, I could potentially double my passive income stream which is something I would like to do when I’m a bit older.

“Money Marketer. Is a couple of thousand extra a year really worth it?”

It’s easy to dismiss the power of such a small income. You can instantly earn an extra $10,000 a year with a promotion at work so does an extra $2,000 or $5,000 really matter? Yes, and I’m about to show you why!

I remember when I first started making passive income as a student, I would make $14/month in bank interest. Excited, I shared this with my friend who said “Does an extra $14 month matter? That’s not even $200 a year”. That is, until I mentioned that my bank interest was essentially buying me 3 bubble teas a month. It made my little baby passive income stream seem so much more powerful!

Rather than seeing dividends/interest as $X amount per year, assign them to a bill.

This means my passive income from this year will “pay” for my:

  • Electricity bill
  • Internet/wifi bill
  • Mobile phone bill
  • Spotify subscription
  • Water bill

I can cover all of these expenses without working, how awesome is that?! My lazy self would love for my passive income to pay for all my expenses with some spending money leftover. I wouldn’t have to work at all, haha! Hope my boss isn’t reading this.

Don’t dismiss the value of a small income stream as it can be incredibly powerful – if you just view it differently.

If you’re interested in investing in the stock market, you can check out some of my previous articles:

Published by Ruba Khan

Hi, I'm Ruba! The Money Marketer is a financial discussion space to discuss all things money and investment, with a touch of food and lifestyle.

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