The last Blog on my attitude to money raised some questions on what Passive Income is.
As you may gather, Passive Income is the opposite of active income. With other words, you receive income without actively working for it (anymore). There are two sorts of passive income: Business Passive Income and Money Working for You Income. Let’s start with the Business Passive Income by giving you examples:
Imagine that you are an expert on a certain topic and you decide to write a book on that topic. Granted, the book does not write itself, you need to put effort in there. But once written, published and promoted, you start to receive income on the sales of the book: royalties, invitations to gives lectures for a fee, expert status (which has a value too) etc.
Another example: given the current real estate markets a less obvious choice today is buying real estate and renting it out. You may also think about vending machines.
This business passive income always needs an initiative and activity first, but the future efforts and the future income are not linear.
Money Working for You Passive Income is income generated by managing your money. If you have some money in the bank, maybe you can place it on a savings account that gives interest. Or if you want, you can put it on an investment account and trade on the money markets. Managing your money is an activity, but it is not related to your day-to-day way of earning your living, like your job or salary or your company. Any income generated just from managing money is passive income as well.
If you do not have money in the bank to start with, you can always start with Business Passive Income. The questions that can help you to decide how to start:
- What do you know that could be interesting for others to learn from and would deliver added value?
- What do I have that I could rent to others and could serve as an income source?
- What are my hobbies and could I even make a passive income with that?
- Can I start to save? Even a very small amount is enough to get started.
One example of renting resources directly to others is AirBnB.com. I myself am a client using this type of services, where people rent space in their houses or their cars, bikes and other vehicles. The people who offer their assets this way are not in the rental business as such, but just make their resources available to you against a fee when they feel like it. The principle is simple but very efficient. For more info, read this article , but there are plenty ideas you could copy.
The basic idea behind becoming financially free, is to build as much passive income as the costs of your way of living needs without having to work or depend on anyone else for money. This would mean that “active income” has become an extra income. You can work for pleasure only!
The cheer luxury to decide when you work, with whom you work and what type of work you do, is incredible!
You will notice your energy increasing, you deliver even more excellent results, you are more open to challenges and new ideas and you start to share even more knowledge. Even when you think you are thoroughly enjoying your work today, it can increase even more, when the topic of income is not on the table anymore.
If you start building passive income today, you have to understand that at first you have to put a lot of energy in it and that building it costs time. We started 3 years ago with building Internet sites that will generate passive income. With other words, when finally finished they generate income without much extra work. Believe me, that’s not an easy task. We are still in the building process and the proceeds are not quite yet what we would like them to be.
We are lucky to have some savings, so the other effort and time goes into money management.
Together the two sources are now delivering a passive income that allow us to worry a lot less about active income and the effect has been very positive.
What resources do you have that you could generate some passive income from? What creative ideas do you have to generate passive income and what could work for you? Please share by adding a comment.
Next week I will give some tips on how to manage your money in such a way, it attracts even money….
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