If you search the net for “passive income”, you may find a definition or two, but mostly, what you find are websites trying to sell you on the passive-income-flavor-of-the-day. It’s frustrating, I know. I don’t know about you, but before I jump into any opportunity or even before I take a trip, I like to do my research. That being said, there are a lot of good opportunities out there. But before you start spending money, let’s discuss what extra money is and, above all, what it isn’t.
Webster’s dictionary defines passive income as “of, in relation to, or being business activity wherein the investor does not have immediate control of income”. I don’t feel that tells the entire story. Passive income is money that you receive repeatedly while not having to do much work (notice I didn’t say “any work”). It is different than earned income in that you are currently not receiving money for the time (like you will work). But depending on the passive income stream that you simply choose, you may in fact have immediate power over your earnings. But I’ll reach that later.
Why could you want residual income? Well, like Robert Kiyosaki explains within his book Rich Dad Poor Dad, this is the main distinction between the rich and also the middle-class. The rich invest their cash in different residual income streams. When their passive income exceeds their expenses, then they are financially free. “Financially free” basically means that you do not have to possess a day job to cover your expenses. And you also are “free” to then do whatever you want!
What Residual Income Isn’t. Before I get into suggesting what residual income is, let me first tell you want to buy isn’t. Passive income will not be the same as “recurring income”. Residual income is money that you receive on a regular basis after you have done work once. The most effective example could be TV sitcoms. Some actors get “residuals”. Actors earn money from filming the show. Afterwards, some actors receive money every time the show repeats. Sales representatives that sell services, subscriptions, or renewable products (like insurance) sell that item once and, providing the customer renews, will receive a commission from each renewal. Royalties from your sale of books and music will also be residual.
Many say that multi-level-marketing or multilevel marketing sales present you with residual income. Guess what? That’s residual too.
If you have a small company or are self-employed, even should you be making lots of money, this is NOT passive income. If you obtain a salary from the business, that is certainly is turo sketchy. There exists a method to turn this into passive income, however – so stay tuned.
You know, We have to state that starting your very own website should not be passive income. Whether you are selling a product (including an eBook, seminar or other information) or perhaps a service, you still have to promote your site. You will need to do this regardless of whether you are selling your personal products or have the rights to promote other’s products. Marketing your internet site is work, simple as that. But it’s not really a job. And once your marketing efforts begin taking off, you can make a lot of cash with little additional effort. But that is certainly residual inside my book, not passive.
What Residual Income IS – Passive income is a lot of things. First of all , concerns mind, and in addition, I think, the most popular example is real estate property. In the event you own investment property and are obtaining a positive income coming from a house, commercial property, or apartment, that is certainly passive income. If you rent rooms in your house, that’s residual income too. You only need to set this up once, and so the income comes in every month. Interest income from savings accounts, CDs, and money-market accounts are passive – the bank pays you to keep your hard earned money in those accounts. If you have a web site with banner ads or Google AdSense ads, that can be called passive as well.
If you spend money on any company, but don’t manage it, your profits are viewed residual income, exactly what Webster was thinking of when he wrote the definition.
Have you thought about business? Well, that depends about how you set it. Rich people create businesses and set up a process that this business follows. That way, when the owner continues on vacation to get a month to Fiji, the employees adhere to the system and the owner still will get the profits. Any organization will obviously start out with a lot of work, however, if you spend some time to set up an organization so it gets reproducible results (exactly like a franchise), those profits become passive. And, in accordance with the IRS, any salary you get from your company is considered “earned” but profits are thought “passive”. It is vital when starting a business to check having an accountant plus an attorney to set increase your business that financially benefits the finest.
What else can be looked at passive income? Think about self-storage facilities, parking garages/lots and dry cleaners! Each of them require some time to start up, but once they may be set up, you collect money again and again.
Residual vs Passive Income – Residual and passive income are like siblings. These are both very similar and many people really consider them synonyms. Precisely what does it matter, anyway? They are both excellent methods for getting money in your hands every month after month without trading your time or maybe your freedom. How can it get better than that?
Reality Check – Beware of anybody that lets you know that there is absolutely no work associated with debt. Residual income does not mean no work! If you are planning to spend in a business, a stock, or perhaps a property property, you will have to seek information (this is called “due diligence”). Research is work! Additionally, you will be asked to manage your investments, to check on their xwmpuf and make changes as necessary. That’s work too!
The good news is that research and management is only a part time endeavor. And most of the time, that work can be performed from almost anywhere, including on a beach in Fiji.
Let us not forget the FUN factor. I’m sure there are some of you looking over this who like, even love their jobs (if you still have one). Some of you have your very own business – and congrats to you! But most of us have been in jobs just because we must feed our families and spend the money for bills. Looking into passive income streams and investing your time and expense can give you many, many returns. Researching for and implementing your residual income plans so that you will can live your dreams is FUN. Getting money every month, week, or even every day is FUN. And trying out new strategies and managing your hard earned money – if you have some to manage – is FUN.