So you hear the term “Passive Income” tossed around online, maybe at work among your co-workers, or read it in a book. Now it seems like you hear it everywhere you go.
If you do know what passive income is, you may think that it's just a term that wealthy people use. You may even think that passive income is a strategy that only those with money can create. Because it takes money to make money, right?
Did you know that passive income can be made by anyone with a willpower, desire to succeed and a little bit of elbow grease? Yup. Not just people with money can generate passive income streams.
If any of that sounds like you, then read on. I'm going to discuss the real meaning of passive income, and help you to understand why its an important concept to understand. Once you see the power in passive income, hopefully you will feel just as excited about it and what it can do for you.
What Is Passive Income?
You will find that many organizations and individuals define the meaning of passive income. Each are similar, but vary slightly. Here are a few popular meanings of Passive Income:
“Passive income is earnings derived from a rental property, or other enterprise in which a person is not actively involved.”
“Passive income is income resulting from cash flow received on a regular basis, requiring minimal to no effort by the recipient to maintain it.”
Under the “Financial Dictionary” tab of TheFreeDictionary.com, it defines passive income as:
“Income (such as investment income) that does not come from active participation in a business. Specified by U.S. tax code.”
Passive Income Defined by The Money Minutes
Here on The Money Minutes, we are all about building passive income. Our attempt is to help people generate new ideas and ways they can generate multiple streams of income without having to spend much time managing those income streams. So what is passive income? Here is our definition of what we mean when talking about passive income:
- “Any source of recurring income that takes less than part-time work to manage and maintain. Some passive income streams take part-time or full time work to build, while the result yields a consistent stream of passive income that can be managed with little or no time in the long run.”
The way we see it, if we can generate as many streams of passive income, the result is exponential wealth and ultimately financial freedom.
Why is passive income important?
Let's be honest…we all like money, at least to some extent. Now I'm not talking about obsessing over becoming wealthy and rich, but I think we can all agree that a large source of stress and difficulty can be generated from the lack of managing our money properly. One of the number one reasons couples get divorces is because of finances.
Would you agree that if you had more money dripping into your bank account on a regular basis that you could accomplish a lot more? You could finally pay off that bad debt you've been carrying? You could enroll your kids in their favorite sports programs now, etc.
Well, that's why it's important to continue to build multiple streams of passive income. You probably have your full time day job that pays your bills and living expenses. But what if you could start to generate a consistent flow of extra income a few months to a year from now that would continue to grow, with only the need of 30-60 minutes, or maybe an hour or two per day?
How do you think the millionaires of today got to where they are? The majority of them have their hands in multiple businesses, with a few books published, websites that get a million+ views per month or day, and investments that give them quarterly dividends.
They all understand the importance of passive income, and how building multiple streams of passive income will allow you to live the life you want to live.
Don't get this confused with greed and “the love of money”. I personally work to create financial independence so that I can spend more time with my family and kids. I want to have the money and financial resources to give to the community when I feel it's needed, or to help a family in need. That's the real reason behind my desire for building passive income streams.
How to start creating passive income today
Generally speaking, most sources of passive income takes a little bit of work up front to get started. Just as an airplane uses most of its fuel during the takeoff and is then able to coast through the sky, so it is with various strategies of building these income streams.
In most cases, the more work it takes up front to build a passive income stream, the more potential it has to bring in more money passively. The less time it takes to build the stream of income, the less amount of money it will most likely generate passively.
Examples of passive income include:
- Owning a small business while having employees manage it
- Online business such as:
- Affiliate marketing
- Email Marketing
- Publishing books
- Licensing a product invention
- Real estate investing
- Day trading/Forex trading
The important thing is to start building new income streams as early as possible. Time is the biggest asset you have and years from now you will be happy you started today.
There are two ways one is able to begin donating to passive income. The first is by putting their money to work for them in the form of investing in the stock market, real estate, or small business start-ups. The second is sacrificing some extra time to start building your own side business online or locally.
Depending on your scenario, whether you have money or not there are options to start.
Passive income strategies that take money to start
The following strategies take anywhere from $5-$25,000+ to start:
- Investing in the stock market
- Investing in real estate
- Investing in small business
- Peer to peer lending
- Investing in cryptocurrency
Passive income strategies that take time with no money to start
- Affiliate marketing
- Email Marketing
- Writing a book
- Licensing a product invention
- Ecommerce (there are ways to do this without needing to purchase inventory)
Other strategies to generate passive income
While some may argue that these be considered passive income, we talk about them here on The Money Minutes. Why? Because the following strategies can be used to make extra money or save extra money without changing any of our current lifestyle habits. Here are some other strategies to generate passive income:
- Shopping online through cashback websites
- Rewards credit cards
- Restructuring your debt (saving money on interest rates, etc.)
While these may not be classified as passive income to many, we consider it to be a form of extra income because you can accomplish every one of those without having to take up any extra time or money from your life to make or save money.
The ultimate financial goal
Once one is able to achieve a flow of passive income on a monthly basis that is greater than that of your living expenses, they have achieved the status of financial freedom. They are then able to stop working and the money keeps coming in sufficiently to pay for their living expenses.
More often than not, these strategies take time, but honestly they are just as easy to do as they are not to do. By starting now to generate multiple streams of income, you have the potential to change your life, your children's life and even future generations to come.
To browse passive income strategies at The Money Minutes, hover your mouse over the “categories” tab above to see different strategies taught here.
What ways of generating passive income have been most beneficial to you and how did you start? Post your questions and comments below!