If you search the net for “passive income”, you may find a definition or two, but mostly, what you find are websites promoting you on the passive-income-flavor-of-the-day. It’s frustrating, I know. I don’t know about you, but before I jump into any opportunity or even before I take a trip, I like to do my research. With that being said, there are tons of excellent opportunities out there. But before you begin spending money, let’s discuss what writing jobs is and, most significantly, what it isn’t.
Webster’s dictionary defines passive income as “of, in relation to, or being business activity in which the investor lacks immediate power over income”. I don’t feel that tells the complete story. Passive income is money that you get repeatedly without needing to do much work (notice I didn’t say “any work”). It is actually distinct from earned income in that you will be not receiving money for the time (like you will work). But depending on the passive income stream that you simply choose, you may actually have immediate power over your revenue. But I’ll get to that later.
Why could you want passive income? Well, like Robert Kiyosaki explains within his book Rich Dad Poor Dad, that is the main difference between the rich and also the middle-class. The rich invest their funds in a variety of residual income streams. When their passive income exceeds their expenses, then they are financially free. “Financially free” basically means that there is no need to have a day job to pay for your expenses. And you also are “free” to then do anything you want!
What Passive Income Isn’t. Before I get into suggesting what residual income is, let me first inform you want to buy isn’t. Passive income is not exactly the same thing as “recurring income”. Recurring income is money that you receive frequently after having done work once. The very best example will be TV sitcoms. Some actors get “residuals”. Actors earn money from filming the show. Afterwards, some actors get compensated every time the show repeats. Sales people that sell services, subscriptions, or renewable products (like insurance) sell that item once and, offering the customer renews, will receive a commission away from each renewal. Royalties through the sale of books and music are also residual.
Many say that multi-level-marketing or multi-level marketing sales provide you with residual income. Guess what? That’s residual too.
If you have your small business or are self-employed, even should you be making lots of money, this is simply not residual income. If you receive a salary out of your business, that is certainly online business. You will find a method to turn this into passive income, however – so stay tuned.
You know, I actually have to express that starting your very own website should not be passive income. Regardless if you are selling a product or service (like an eBook, seminar or other information) or even a service, you still have to market your internet site. You will need to do that regardless of whether you are selling your OWN products or have the rights to sell other’s products. Marketing your site is work, simple as that. But it’s not just a job. And as soon as your marketing efforts begin taking off, you can make a lot of cash with little additional effort. But that is certainly residual in my book, not passive.
What Residual Income IS – Residual income quite a bit of things. First of all , concerns mind, as well as, I think, the most popular example is real estate property. If you own investment property and they are obtaining a positive cashflow from the house, commercial property, or apartment, that is certainly passive income. If you rent rooms in your house, that’s passive income too. You only need to set this up once, and so the income comes in every month. Interest income from savings accounts, CDs, and funds-market accounts are passive – the bank pays you for keeping your money in those accounts. In case you have an internet site with banner ads or Google AdSense ads, that can be called passive as well.
If you put money into any company, but don’t manage it, your profits are viewed passive income, precisely what Webster was thinking of when he wrote the definition.
What about business? Well, that depends on how you set it up. Rich people create businesses and set up a method that this business follows. This way, in the event the owner continues on vacation for any month to Fiji, the employees adhere to the system and also the owner still receives the profits. Any business will obviously begin with many different work, but if you spend some time to set up a business so that it gets reproducible results (exactly like a franchise), those profits become passive. And, according to the IRS, any salary you get from your enterprise is considered “earned” but profits are considered “passive”. It is vital when starting a business to check with the accountant and an attorney to set up your business that financially benefits you the greatest.
What else can be considered passive income? How about self-storage facilities, parking garages/lots and dry cleaners! All of them require some time to launch, but once these are set up, you collect money over and over again.
Residual vs Residual Income – Residual and passive income are like siblings. These are both very similar and a lot people really consider them synonyms. Exactly what does it matter, anyway? They are both excellent methods for getting money in your hands every month after month without trading your time or your freedom. How can it improve than that?
Reality Check – Watch out for anyone who lets you know that there is absolutely no work associated with debt. Residual income does not mean no work! If you are intending to spend in a business, a stock, or a real estate property, you will have to seek information (this is known as “research”). Research is work! You will also be required to manage your investments, to check on their xwmpuf to make changes as necessary. That’s work too!
The great thing is that research and management is just a part time endeavor. And most of the time, that work can be completed from almost anywhere, including on the beach in Fiji.
Let us keep in mind the FUN factor. I’m sure there are several individuals reading this article who like, even love their jobs (if you still have one). A few of you might have your very own business – and congrats to you! But the majority of us are in jobs just because we need to feed our families and spend the money for bills. Looking into passive income streams and investing your time and money can give you many, many returns. Researching for and implementing your passive income plans so you can live your dreams is FUN. Getting money on a monthly basis, week, or even every day is FUN. And attempting out new strategies and managing your cash – if you have some to manage – is FUN.