What Is Passive Income?

Want to make passive income? Here's how...

I’ve been researching online money-making opportunities for quite a while now and keep coming across articles and blog posts about passive income.  But just what is passive income and how do I get it?  Let’s take a look at what the term “passive income” means.

First, let’s define a few other terms:

  • Active income is the opposite of passive income and it requires a time for money trade.  You quit doing the work and the money comes to an end.  This is the type of income most people have.
  • An income stream is any source of regular income.  It is best to have multiple income streams so if one dries up, you won’t lose everything.

According to some, passive income is income that you receive on a regular basis that requires little effort to maintain it.  Once you’ve done the initial work, you sit back and the money flows in.  Sounds great, right?

Now, notice I didn’t say there was NO work involved or that it was some type of get rich quick scheme.  It most definitely is not.  This is not a “something for nothing” type of deal.  You will have to put in work.  Sometimes a whole lot of work.  All of that is done at the front end, then you keep getting paid over and over for the same work.  This is called front loading, and it takes an investment.  You can either choose to invest money or you can choose to invest time.  I choose to invest time.

If you work hard enough and stick with it, you will eventually reach the point where your income stream gets activated and you can quit working on it and more money will keep coming in with little to no work from you.

Here are some things passive income is not:

  • It is not permanent.  It may last a really long time, but it doesn’t last forever.  Another reason it’s best to have multiple income streams.
  • It’s not risk-free.  There is always some risk involved with passive income so spreading out over multiple income streams is the best bet.
  • It requires no work.  Like I mentioned before, there is a LOT of work up front (usually) and then it really is best to do some maintenance.
  • It doesn’t happen overnight.  If you need rent money by next week, don’t think you’re suddenly going to have a passive income stream that can bail you out.

Here are some examples of passive income:

  • Rental income on properties that someone else manages.  I would love to have this type of passive income.  I think owning an apartment complex that someone else manages would be awesome.
  • Royalties from creative works such as books, music, etc.  This is an income stream I am currently working on with my knitting and crochet patterns.
  • Dividends from investments.  If you have a lot of money to invest you can put it in the bank and live off the interest.  I’m guessing most of us aren’t going to be able to have this kind of passive income, or else we wouldn’t be interested in a blog about debt-free living!
  • Income from online endeavors such as ebooks, blogging, creating an online course.  You get the idea.  These take a ton of work up front but can really pay off.  The key is to not give up.

Those are not all of the passive income ideas but they are a few of the more popular.  I can’t wait to try more of them.  You can find an amazing article with more passive income ideas here!

I hope after reading this that you have a better idea of what passive income is.  Have any other ideas?  Leave a comment below!