Readers' Challenge - Increasing Your Active and Passive Income

In the previous readers' challenge, I gave a challenge to save 50% of your income by setting up an automatic fund transfer. However, saving money has its limits if our income is too low. Therefore, increasing income is also important. But don't get me wrong. You still must focus on saving money if you've not done so. If you already have the habit of saving, then increasing income is the next step for you.

There are many ways to increase our income both in active and passive terms. Active income means the income we earn from our active work where we exchange time for money. Passive income means the income we earn from money working for us. Hence, we can basically earn money in two ways, we work for money or money working for us.


Increasing your Active and Passive Income

Increasing income is not as straight forward as saving money. It takes time to build up our capacity to earn more. But, once we have built it up, it becomes easier and easier.

Here are some ways which I think can potentially increase our income:


1. Upgrade your Professional Skills 

Upgrading our skills set is probably the most basic thing that we can do to increase our active income. Taking up relevant certification courses will enhance our profile which may get us a higher paying job.


2. Learn Communication Skills

Certification will only help us to gain entry into a job. Whether we will excel in our career will depend a lot on how we interact with people. Do you interact well with your boss? If you're a manager do you interact well with your staff? In our work, we probably can't do everything alone and have to depend on some of our other colleagues to get a job done. Good communication skills will definitely help us to work better with other people.


3. Expand your Network

The people we know in our lives will determine our future. Building up meaningful relationships with people in our industry may prove to be useful somewhere in the future. If you choose the right network to build upon, your chances of success can increase a lot.


4. Discover and Build on your Passion

Passion is a powerful force. I've written a few articles on passion in my blog and am an advocate of finding your passion in life. Passion makes us excel in the things we do. We spend hours upon hours on something we are passionate about. A person who's passionate in art will spend many hours drawing. A person who's passionate in sports will spend many hours training and sweating it out. The end result is they become so good at it that people notice their talents and approach them. They get opportunities from everywhere.

If you've yet to discover your passion in life, take some time off your busy schedule and think about your interest. What are the things in life that makes you excited? Keep searching and never give up. Finding your true passion will make your life more meaningful instead of just living everyday without a purpose.


The Challenge - Start another Stream of Income 

Focusing on increasing our current income is important but have you thought of starting another stream of income? Some of my friends I know still teach tuition apart from their full time job. Some are doing their own freelance jobs such as selling property or even health products. Others like me are blogging and writing which happens to earn some money apart from the passion which started it.

Doing a side line job is a good way to have another stream of income. But, the problem is it takes up our time and time is limited in our lives. We still need time for our family, our friends and our own rest and recreation needs.

Apart from doing a side line job which is an active income, we can start another stream of income by creating passive income. Passive income is money working for you. This can be done through investing in property and collecting rent from tenants, investing in stocks and collecting dividends, creating a product/intellectual property and collecting royalties.

Actions to take for this challenge

1. Start a side line job if you have the time

Apart from teaching tuition, those of you who like to write can also be freelance writers who get paid perfor every article written. Those who can do web site designing can also be freelance web designers. Or you can even be a freelance translator, proofreader etc. Check out Elance for freelance job opportunities.

2. Learn how to invest to create passive income

You can invest in virtually everything. You can be an investor in a business, invest in stocks, invest in properties etc. One thing to take note of is to invest in something within your circle of competence. Putting your money into something you are not familiar with is never a good idea.

3. Learn to create your own products/intellectual property. 

A good way to start exploring is to know what you are interested in. Examples of people who have created their own products are book authors who have the passion to write on specific topics, singers who record their own album, artist who create stunning art pieces.

4. Sell your own Stuff

There are many avenues to sell any kind of products online now. Got some unwanted clothes, gadgets, accessories that you want to sell? You can try this app called Carousell where you can sell virtually anything. It is quite popular now that I hear many of my friends talking about it. You can just make a couple of hundred dollars just by selling your unwanted stuffs at home.

Are you ready to take up the challenge? Try some of the ideas above and you'll be on your way to a richer life.

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Related Posts:
1. Readers' Challenge - Cutting Down Your Expenses in 2015 To Save 50% of Your Money
2. Make Money Investing For Passive Income

Readers' Challenge - Cutting Down Your Expenses in 2015 To Save 50% of Your Money

You may have heard advices to save 10% or 20% of your money every month. But, is that enough to grow your money to achieve financial freedom? The average people out there would just be saving 10% of their money or worse still have no savings at the end of the month. If your take home pay is $2000 and you save just 10%, its only $200 per month and $2400 a year. In 10 years time, its only $24,000. That's not a lot assuming you start working at the age of 24 and end up with only $24,000 at the age of 34. If you're good enough to have a take home pay of $3000, saving 10% would only be $36,000 in 10 years time.

Here's the 10% savings scenario:

Take home pay $2000 at age 24, save 10% and have $24,000 at age 34

Take home pay $3000 at age 24, save 10% and have $36,000 at age 34

That doesn't seem like your money is growing fast enough isn't it?


What if we bump up the savings to 50%?

Here's the 50% savings scenario:

Take home pay $2000 at age 24, save 50% and have $120,000 at age 34

Take home pay $3000 at age 24, save 50% and have $180,000 at age 34


A 6 figure savings is not difficult if we save 50% of our take home pay. That is assuming that we take home about 2k-3k per month which is on average what most of us would be getting. If your pay is higher, that's good news for you. If it is lower, you may want to consider upgrading your skills to increase your pay.

Before you say its difficult to save 50% of your salary, here are some ways which will make it easier:

1. Record your expenses daily

Why record your expenses? The primarily reason is you will see where your money goes to when you review it at the end of the month. This will allow you to cut down on the unnecessary stuff in your life. It'll also allow you to tweak some of your expenses and use creative ways to reduce wastage. Recording your expenses everyday seems like a difficult task to do but with mobile apps now, it is much easier. You just have to key in at the end of the day in your phone while you're on your way home.

I personally use an app called expense manager. It's easy to use and you can set your salary to be automatically input in every month.

2. Set up an automatic savings plan

Saving money need not be done manually. I've wrote a few times on setting up an automatic fund transfer to transfer out a portion of your salary once its credited into your bank account.

Here are the steps to do it (For POSB accounts):

If you've not set up any bank accounts payee to be linked to your existing account yet, start with step 1 below. If not, you can go straight to step 2.

Step 1
Add a new payee to be linked to your existing account.

When you log in, you'll see fund transfer at the left hand side of the page. Go to Funds Transfer -> Manage Payee List and Settings. 

Then, select either Add new DBS/POSB payee if you're going to transfer to another DBS/POSB account or Add New Other Bank Payee if you're going to transfer to an account in another bank. 

Step 2

After you're done with the add new payee, on the left side bar, go to Standing Instruction: Manage Instructions & Settings.

Follow the instructions and select your debiting account and beneficiary's account. Type in the date you want it to be deducted (ideally 1 day after your salary is paid  to you). Under the standing instructions, select the frequency of payment to monthly.

There you go, 2 easy steps and your money will be automatically transferred out as savings for you every month. 

For other banks, I suppose you have to add new payee and set up standing instructions also. Shouldn't be that much of a difference. 

The good thing about setting up this automatic fund transfer is you can just spend all your money in this bank account without worrying about having no savings at the end of the month. Just remember not to touch the money in the other bank account which you had transferred to. 

Not Just Cutting Expenses but Increasing Income

Saving money is important. It is a good habit to have. However, there's a limit to cutting down our expenses. If you're alone and living a pauper life, probably nobody would care about you. But if you got a family with your spouse and kids, or you need to go out for dates, there is a need to spend a certain amount of money. There is some reality we have to face here. In the next round of readers' challenge, look out for ways to increase your income. Stay Tune!

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Enjoyed my articles? 
You can Subscribe to SG Young Investment by Email 
or follow me on my Facebook page and get notified about new posts.

Related Posts:
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2. 35 and totally broke or $100K savings by age 30?
3. Save 75% of your income to retire in 7 years