Passive income is income that you generate without working for it. Think dividend income or income from one of your rental properties. The difference between active income and passive income is that passive income doesn’t require you to invest time on a regular basis. While your standard corporate gig requires that you go to work every day for a paycheck, passive income means that you are making money while you sleep.
Passive income comes in multiple forms, and it is the prime source of income for wealthy people that understand the principles of money management and investing.
Passive income is an umbrella terms that encapsulates all forms of income that don’t require your time: It can be income from your real estate that you rent out, it can be investment income from your dividend portfolio, it can be income that you receive from selling e-books or other (digital) products, monetizing blogs, or royalties/license fees.
Passive income equals financial independence. The more passive income you create, the more time you have at your disposal and the faster you can retire early, if that’s what you want. Passive income, for instance, has me allowed to say goodbye to the corporate rat race at about 32 (though I could have done it sooner if I didn’t make so many investing mistakes!). Investing 101 – Don’t Make These Beginner Mistakes (Learn From Me And Save Money And Time!)
Warren Buffett, Bill Gates and nearly every other super-successful entrepreneur makes money from either dividends or stock sales, allowing them to live a lavish lifestyle. But even if you aren’t a billionaire, making money from a website or a digital product or an online store sure as hell beats slaving away in a shitty job in an office cubicle for a pittance.
Creating multiple streams of passive income, hence, should be a top priority for everyone who is reading this, it doesn’t matter how old you are, where you are from, and what your occupation is.
Multiple streams of passive income allow you to diversify your income. If one income stream, for instance, dries up you have other income streams to make up the shortfall. Let’s say you own only 1 rental property. If you don’t/can’t rent it out, you are stuck with an empty house and have to pay the carrying costs yourself. On the other hand, if you own 3 rental properties and 1 property isn’t rented out, you still produce income from the other 2 rental properties. That’s why it is so important to have more than one passive income stream.
The more diversified you are, the easier it will be for you to handle income streams that don’t do well, or that dry up. As far as I am concerned, a good mix of 5-10 income streams from real estate, dividend-paying stocks, online businesses and blogs makes for a well-diversified portfolio that generates cash every month.
Again, it is worth noting that the most successful people in the world are entrepreneurs, business owners, and investors, not employees or people that trade their time for a paycheck. While you can surely hit a goldmine working as an employee and rising through the ranks, the big money and the relaxed lifestyle come with investment and business income.
Imagine sitting at a beach in Thailand, sipping a cocktail, feeling the warm sun on your skin and the sand between your toes…knowing that your real estate and stock investments pay for all of your expenses and that you don’t have to work. Does this beat looking at your watch every 30 minutes at your current corporate gig? I am sure it does.
Build passive income streams.
If you want to learn more about how rich people think about and manage money, check out my e-book “9 Money Secrets Of The Rich – How The Money Elite Outsmarts The Rest Of Us”. Available on Amazon.com.