“Beating the Clock” with Passive Revenue Streams
Driven by science and technology the world is developing at a rapid pace. Change is taking place on a universal scale, provoking a plethora of repercussions and leaving nothing to be certain anymore, especially the job market. Naval Ravikant, US Entrepreneur, Angel Investor, co-author of Venture Hacks and co-maintainer of AngelList, recently said that “we’re seeing an atomization of the firm, we’re seeing the optimal size of the firm shrinking (and soon) high quality work will be available in a gig fashion. () The smart people have already figured out that the internet enables this.”
In this way, to alleviate new socio-economic pressures we should take advantage of the exceptional opportunities that these new readily available internet platforms provide, enabling us to create wealth unconventionally across Passive Revenue streams.
What is a Passive Revenue?
Passive Revenue is defined as an income-generating activity utilising sleeping assets that is “independent or loosely dependent on time commitment”. For instance, running an Airbnb page, on average can provide a monthly passive income of $924 or renting your car out on Turo on average, can provide a monthly passive income of $720. This is in contrast to earning an Active Revenue, our traditional and habitual approach to remuneration, which is at a fixed rate, “received from performing a service”. It can either correspond to an employee’s monthly salary for working 40hr weeks, or a fee, based on an hourly rate.
Generating Passive Revenue – Don’t put all your eggs in one Basket
The most important benefit of a passive income is the additional financial security it can provide an individual. In essence, a passive income acts as a safety net for any external and unpredictable shocks that may impact your active revenue.
On the brink of the fourth industrial revolution, the current workforce is at an even greater risk than its previous. Recently, McKinsey Digital has highlighted that existing “technologies could automate 45% of the activities people are paid to perform and that about 60% of all occupations”, meanwhile the World Economic Forum underlined that “54% of all employees require significant re- and upskilling by 2022” to remain competitive in the workplace as a consequence of digitalisation, otherwise known as the third industrial revolution.
This transformation eventually will occur as technology is further interwoven into our lives, consequently prompting new found requirements to remain eligible in the workforce and impacting our active income significantly. Not only will we need to constantly undergo training to maintain employable and competitive, but we may even need to change our area of expertise completely as we become replaced by technology. Therefore, it is imperative we secure a passive revenue to ensure our future financial security.
Money is one of our society’s most prominent social constructs. Collectively, we have all submitted to monetise objects and items, which has left us to attain wealth for one of two purposes. Either the essential, which is the primary purpose of earning a revenue, to gross enough to ensure one’s basic standard of living, or the inessential, which is the secondary purpose of earning a revenue, to give oneself the financial freedom to afford their desired luxuries whatever they may be.
However, despite their value, they are both becoming increasingly difficult to attain. For example, in the USA, the cost of living has risen by “14% in the past three years alone” and it is expected to increase further in the coming years.
Subsequently, in our current environment, in order to just maintain our growing cost of living, it is either necessary to earn more than ever before or sacrifice the luxuries which we have grown accustomed to. Most people opt for the former, but there are only ever so many hours in the day.
Famously Warren Buffet, who is considered to be one of the most successful investors in the world, once said:
“If you don’t find a way to make money while you sleep, you will work until you die.”
Globally, life expectancy in the last 20 years has risen at “its fastest rate since the 1960’s, increasing by 5.5 years”, leaving many unable to financially keep up. For instance, the Financial Times has stressed that in the UK, “the average female will outlive her savings by 12.6 years; while for men the gap is 10.3 year”, resulting in “10% of Britons working past the age of 65, which is double of those in 2000.”
This phenomenon is not unique to the UK, however it is noted globally through the revaluation of the retirement age in multiple different countries. Hence, creating a successful passive income is not only an underestimated tool to act as a current safety net or a relief on your active revenue, but it is also a great provision for the future enabling one to commit to either part-time employment or even early retirement.
This trend to pursue an independent influx of capital that is scarcely dependant on time is becoming increasingly important for individuals whom aspire to exit the rat-race society that the active income insinuates.
Ultimately, money is a requisite in our society, it can be earnt, spent, saved, and your personal quantity will always differ, but our time is fixed; it can only be wasted. Thus, the pursuit of a passive income is superior than that of an active income, as it emancipates your time, giving you the freedom to enjoy what life has to offer away from the world of work.
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