What is Passive Income?

What is passive income?

An Overview: What is Passive Income?

Passive income is earnings received on a consistent basis without investing effort for each and every dollar earned. Most people think that passive income is ‘easy money’ but this isn’t really the case. In reality, it demands a lot of hard work. Things in life don’t happen magically overnight and passive income is not an exception to this. Once you understand the fundamentals of generating passive income, you can be on track of achieving financial freedom.

There are several ways to earn passive income. Here are some of the main ones:

• Income from real estate
• Interest accrued on a bank account
• Income from internet marketing
• Licensing a patent or royalties from publishing a journal, book or music
• Income from a business that doesn’t require direct participation from the owner

Let’s get some insight about all these modes of passive income generation.

Income from Real Estate

Investing in real estate is a proven way of generating passive income. Though real estate investing is a source of both residual and passive income, the earnings arising out of investing in trust deeds is considered as passive income because you don’t have to be actively involved in the management of accounts.

Alternatively, you could buy a second home and rent it out while hiring a property management company to take care of all the details for you-you’ll earn a bit less but also not have the headache that goes with being a landlord-basically it turns your property from something that is actively managed into passive income.

Bank Account Interest

An ideal example of passive income opportunity is the interest accrued on a bank savings account-it’s a perfect example of something that everybody can do. However, one of the major drawbacks of it is that your income stream depends on the amount deposited into your account. Also, you need to lock in a substantial amount in your bank account to get sizable interest income. If the interest rate drops, your passive income will take a hit. To overcome this situation, you’ll have to add more funds to your account to continue getting the same income.

A better alternative is to invest in dividend paying stocks or ETFs, especially now that interest rates are so low.

Internet Marketing

Internet marketing attracts a huge number of people because there are plenty of opportunities to earn a sizable passive income. Let’s look into some proven ways of achieving it.

If you’re going to start a website, the hosting service that I recommend most of all is Bluehost. They’re rock-solid and offer great customer support for the beginner.



And don’t forget to collect those email addresses-I use MailChimp.

Product creation: Creating products is probably the most sought after ways of receiving a hefty passive income. Products bring in sales and leads simultaneously and its creation doesn’t require any marketing efforts or knowledge of SEO. You only need to create it once and enjoy the returns on a continuous basis, although marketing and SEO will kick your sales into high gear.

Writing books is how I earn most of my passive income, apart from dividend paying stocks. Check out my author page on Amazon.

Blogging: This is one of the favorites among internet marketers. All you need to do is set up a blog and start blogging about industry trends, news and popular products, in addition to writing a lot of reviews. You can promote affiliate products and get upfront commissions as well. However, you will need to invest a good amount of time to keep your blog updated to entice your readers and encourage them to keep coming back. I talk more about it in this post: How to Make Money Blogging. To see all the websites that I have up and running, check out: www.jackiebolen.com.

Coaching programs: In the internet marketing field, there are lot of newcomers who need guidance and good mentors. You can bundle up your expertise in internet marketing and make a coaching program website that requires a membership fee. You could also design a course or host a webinar. Remember to try to avoid the need to do one hour of work to get one hour of pay (like in a 1-1 coaching program) because that is exactly what passive income is not.

Income from Royalties

This is yet another good passive income opportunity. You can earn a good amount from writing books, journals or songs. For example, the heirs of a writer have the right to auction the write-ups. You can bid on them and if you are selected, you’ll be the owner of the piece and entitled to a monthly royalty paycheck. Then if you can market it well, you can collect a decent amount of royalties.

Income from ‘No Material Involvement’

If you invest into a business with the agreement that the possessor would pay you a percentage of the income, that would be a passive income as you don’t need to be involved in the business operations. For example, think about venture capital. If you invest in a VC firm as a limited partner instead of a general partner, your income would be considered as passive income. That’s because a general partner would have additional responsibilities other than investing money while a limited partner would have no such materialistic participation.

Benefits of Passive Income

• Passive income doesn’t involve a boss who will monitor each of your daily activities.
• You’ll have to pay lower taxes compared to the same income if it were to come from a job.
• It allows you to enjoy a lifestyle of your choice. If you’re earning passive income, you can go on a long vacation or opt for days where you don’t work at all.
• Passive income empowers you to be your own boss. You can choose to continue or quit depending on what suits you the best.

Is Your Job Really Secure?

In today’s economy, a job is not at all secured. Compare that to a passive income opportunity, which lets you enjoy money and financial freedom without the burden of a full-time job. Want to live life on your own terms? Experience some financial freedom and escape the 9-5 hell? Get working on those passive income streams!

Freedom Through Passive Income is on Facebook.

2 Comments

  1. Pingback: September 2015: Killing it on the passive income

  2. Pingback: Building passive income streams = Financial Freedom

Leave a Reply