Saturday, 9 July 2011

Passive Income: The Holy Grail of Income

Imagine earning money while you DON'T work.

Assuming you are in paid employment, each day you go to work and engage in activities as directed by your employer. In effect you exchange your labour, knowledge and skills for a pay cheque. There is absolutely nothing wrong in doing this but it does mean that you have to be directly involved and physically present each day.

Yeah, you could do overtime (assuming you are in a job that pays overtime) or even take a second job but these still require you to be personally present and exchanging your labour for cash.

If you are in paid employment, you can't be elsewhere during your working hours. That means you can't be earning more money by working somewhere else or watching football or
chilling out or white water rafting or whatever else it is that
takes your fancy during work time.

So, is there another way?

Passive income is another way of thinking - the holy grail of income streams.

In essence, passive income is earning money when you are NOT present.

At its simplest form, passive income can be interest earned from savings. But that doesn't even scratch the surface.

I'm not saying that you don't have to do any work. It's probable that you will have do to some intensive work early on but the magic is that once the inital work is done, the income tap is turned on and remains on whether you are present or not.

Some examples of passive income:

  • share dividends
  • rent from property
  • royalties from publishing a book or music
  • affiliate links to other websites
  • creating and/or owning a paid app
  • making a dvd (for example a martial arts instructor who makes a teaching DVD and sells it at his dojo)
  • a photographer who receives a royalty from the use of his photos
The concept of passive income is a mind blower.