Financial Planning: Focus on creating passive income

Once you retire your regular flow of income will stop and you have to survive on the income generated from your investments. These days everyone keeps talking about retirement planning, which is essentially planning for your golden years via traditional way of earnings either out of your job or a business. But how many of us have thought about generating a passive income, alongside your active source of income, which is your job or business? I strongly suggest you focus on generating passive income right away. Start by spending some time for it and the small steps you take towards it will grow with time and eventually it will lead to generating a regular flow of that extra income.

Let's see some of options to create passive income and why it is important for you to create one:

Regular investments: If you invest your surplus money smartly in the investment products as available in the market, such as real estate, equity, mutual funds or fixed deposits then you would be able to generate a regular flow of income in the form of rental, dividend, market returns, interest, etc. This is the traditional way of creating retirement corpus which can be used to create passive income, provided you start early. Then it helps you to get a regular flow of income while you are still away retiring.

Blogging: Apart from the regular work, there are things which people are passionate about and like to share their opinions on it. For instance, reviews on food, movies, travel, parenthood, diet or what not. You may have seen people making good money by doing this in a structured way by starting a blog and the best part is, it hardly cost anything. The regular flow of advertisement income and also the affiliate income through affiliate programs is one of the best ways of creating passive income, though it takes time for the money to start coming in, but it will you keep doing it regularly.

Books and royalty: If you have content which can be published as a book, then another form of creating passive income is royalty. If you don't find a publisher then you can get the same self-published. Today there are several platforms that allow self-publishing. If the content is good and saleable, it will result in good amount of royalty over time.

Consulting work: Your weekends can be used for doing some freelancing consulting in areas related to your sector. Or you could take lectures at management colleges or other educational institutions to generate passive income.

There could be many ways passive income can be generated but the challenge is that most of us don't take seriously or keep procrastinating. Always remember, the way power of compounding works for your investments (that is however small your monthly contribution is if invested for long term, it results in to huge corpus), likewise the baby steps you take at an early stage of your life will create a similar source of parallel income.

I have already talked about the power of creating your first Rs 1 crore as soon as possible, in one of my earlier columns. As discussed earlier, the best part about creating your first Rs 1 crore is to have a regular source of income. Once you have Rs 1 crore and assuming you invest it in a Fixed Deposit at 6% per annum, even a low return of 6% will start giving you Rs 50,000 on a monthly basis. This is the power of creating a base. Be it a corpus of Rs 1 crore, or any other source of passive income as mentioned above, the idea is to let your money, time and talent work for you. Imagine what would happen once you create more than Rs 1 crore or a passive source of income flow? Simple, you can retire young retire rich.

The writer is chief gardener, Money Plant Consultancy