Active at passive income, ano ang pagkakaiba?

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Transcript

00:00In this day and age, many of us are looking for ways to make sure that we don't have to work too much.

00:08But most of the time, we don't know how to start or what we can do to achieve it.

00:15According to some experts, one of the ways is to have a passive income.

00:21This is also related to using financial freedom.

00:24So that's what we're going to talk about this morning.

00:26We'll be joined by social entrepreneur, Sir Vince Rapisura.

00:31Sir Vince, good morning.

00:33Hello, good morning, Audrey and Rob.

00:36And of course, thank you for inviting me to your financial guru.

00:43Okay, sir. First of all, what do we call active and passive income?

00:50Active and passive income can be defined in terms of source, effort, and use.

00:58The source of our passive income comes either from assets or investments.

01:05Active income comes from labor or work.

01:10Effort in active income is continuous.

01:15And in passive income, the effort we need is minimal.

01:20And in terms of use, our rule is that we use active income to meet our basic needs.

01:28And passive income is what we use for our periodic wants.

01:34Sir Vince, let's talk about passive income.

01:36What are some of the benefits and advantages of having it when it comes to our finances?

01:42Yes.

01:43So in passive income, when you earn it, as we said earlier, the effort is minimal.

01:49Plus, another advantage of this is that usually, the taxation of passive income is lower compared to active income.

01:58The highest passive income I've seen is only 20%.

02:03But in our tax, it usually goes up to 30%.

02:08On the average, the taxation of passive income I've seen is about 5-10%.

02:14So that's the advantage of passive income.

02:19Minimal effort and tax advantages.

02:23But admittedly, before you have passive income, you need to create an investment portfolio first.

02:32And this could come from investments that would earn you rent, interest, dividend, capital gains, royalty, or pension.

02:41Sir Vince, how does passive income come about?

02:46And what are some of its sources?

02:51Some people think that passive income is automatic.

02:56But in reality, passive income comes from active income.

03:02So what we do is, our money from active income, from our salaries, from our business,

03:10we save a portion of it, and when our savings increase, we invest it now.

03:17So when we invest, it can be through rental properties or real estate to earn the passive income.

03:25We can also put in savings, or borrow money, or earn interest.

03:33And then we can put it in stocks or participate in MP2.

03:38It will earn dividends.

03:41When we invest, we use our savings, we invest it in land,

03:46and we sell it over time, capital gains are what we call our income.

03:52And our regular contribution to the SSS, over time, when we retire,

03:58that will earn us passive income, and that is called pension.

04:02And if you have creative works, like a book or a recording, you can earn through royalties.

04:11Sir Vince, aside from what you mentioned, is there a strategy or a way for this passive income that a person has to be sustained?

04:20Yes.

04:21So the rule here is that we will use our passive income for wants and active income for needs.

04:31And what happens is, typically for Filipinos, we spend our income for our wants.

04:41So it would be better if we invest it first, save invest,

04:46and then the passive income that we will earn from the investment,

04:49that is what we will use for our wants.

04:52And then what I also see is, it is not automatic for Filipinos to save and invest.

05:00So what we should do is, we should do it automatically.

05:04So if you have a bank account, put it in right away.

05:0615% is automatically transferred to your emergency savings account or to your investment account.

05:13So that you don't have to think about it.

05:15So that is the strategy that is needed for our passive income to increase.

05:21Sir Vince, you mentioned earlier the allocation of active and passive income.

05:27What are the things that we can use for passive income?

05:32Yes.

05:33So we will do it for wants.

05:36And to make it easier for us to do it, we really need to look for different ways to earn our income.

05:46And the way is, we can increase our income or decrease our expenses so that we can invest.

05:57But for me, what you should do first is, try to reduce your expenses so that you can have extra savings.

06:05And that is what you will put in different types of investments that will earn you your passive income.

06:13And this is not fast.

06:16Because what I always say is, we need to do it slowly.

06:20I have OFWs, for example, that I teach.

06:23They already have rental properties.

06:25But there are those who save 5 to 10 years before buying land and building their apartment.

06:33So it really takes some time to get a sizable amount of our passive income.

06:39And our goal there is, the passive income that we earn, I hope it can cover our monthly expenses.

06:49Because if our monthly passive income can cover our monthly expenses,

06:56it means that technically, we are already financially retired.

07:00Even if we are not yet 60 or 65 years old.

07:03Sir Vince, you mentioned that passive income is like a lot of money for once.

07:09But Audrey, of course, there are times when we cannot avoid using passive income.

07:15What is the rule or limitation for using passive income when people have no choice?

07:23Actually, for me, it is easier to use passive income.

07:29Because as I said, it is for once.

07:31For me, what I follow is, you need to be happy in terms of earning your money.

07:42If you earn money and you don't enjoy it, it is hard to save.

07:48So what you should do, the framework that you should think about is,

07:52make your needs and wants your motivation to save and invest.

07:59So for me, Rob, it is okay to spend our passive income for once.

08:06But the challenge is, you need to create passive income first.

08:10Which is the more difficult part.

08:12Because there are stages, you need to save first.

08:15You need to have an active income, save, invest, and then you will have a passive income.

08:22Sir Vince, are there also disadvantages or risks in using passive income?

08:29Yes, of course.

08:31All of our movements in the world have risks.

08:36The risk is, for example, if our investment is closed, bankrupted, or not working,

08:45our investment may be lost.

08:49Actually, one of the famous sources of passive income is the stock market.

08:57But for me, it is hard because you are not sure if the risk of losing your money is high.

09:05Yes, the positive returns are high, but the risk of losing your money is also high.

09:12So I would stick to safer investments.

09:16For me, I will not go far.

09:18MP2, our SSS Pension Booster, will assure us that we can get our passive income.

09:28And then the longer term, which is safer for me, is real estate investing.

09:33When we rent, we will have a rental income.

09:36That's it. Our fellow countrymen should listen to this.

09:40Thank you very much, Sir Vince Rapizura, for your time and for the important tips and information that you shared with us this morning.

09:48RSP, if we can have a passive income, we should also invest.

09:54This way, we will have a chance to live more comfortably.

09:59It will be more secure and we will have more time for things that are important to us.

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