What is passive income exactly? Passive income is simply money that is made passively! And what does that mean?! Well…basically, it is money that’s created by doing as little work or the most minimum amount of work possible. Unlike a job where we have to work in order to earn an income, passive income comes from goods you own that generate earnings on their own. There are many people that believe passive income is a bunch of BS. That, the only way to earn money is to work for it! A days-work for a days-pay! Although there is some truth to that, it’s not the whole truth and they’re actually wrong. Then, there are those who believe that you have to have a ton of money to create passive income. And of course…they’re wrong too! Now, I’m not suggesting that we don’t have to work hard or that it doesn’t take money to create passive income. But, what I am suggesting is that we need to have a better understanding of what it is, where it comes from and how important it is for achieving true financial independence.
What is Passive Income?
The idea of passive income can be a tricky concept to grasp. The most important thing to realize is that passive income doesn’t just happen. It’s created! Passive income can be created from a number of different sources. The most common places include, but are not limited to, the stock market, business, real estate and intellectual properties.
Each of those sources varies in how much time, effort and money is needed to create passive income from them. In the stock market you can invest in securities that generate monthly dividend payments. You can create, purchase or invest in a business that is fully operated by employees. In real estate you can purchase a rental property in which the tenants pay rental income each month.
“You become financially free when your passive income exceeds your expenses.” – T. Harv Eker
Intellectual properties are creations that can be protected by a copyright, patent, trademark, etc. such as music, books, e-books and branding for which royalties are paid for their use. Regardless of where or how the income is generated, the key is making a conscious decision to put in the effort to create it. The simplest way to start is by saving and investing the money earned from a primary job.
No matter how small or little the amount of money saved may seem, it will be the accumulation over time that will make the difference, like a snowball effect. Start with any amount, be disciplined, be consistent, be patient and one investment will lead to another. The creation of passive income is built over time, so the sooner you start to build it, the sooner you will achieve real financial freedom!
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