Many people desire passive income versus active income which one has to trade his time and efforts for. The idea is that passive income if greater than one’s expenses leads to financial freedom.
While not an academic exercise, let’s look at how passive income is defined in Wikipedia:
Passive income differs from earned income & portfolio income in a variety of ways. Passive income is generally defined as a stream of income earned with little effort, And it is referred to as progressive passive income meaning there is little effort needed from the individual receiving the passive income in order to grow the stream of income. Examples of passive income include rental income and any business activities in which the earner does not materially participate during the year.
The definition even excludes portfolio income which includes income from dividends, REIT distribution income, stock capital appreciation gains etc.
To me, I am not too concerned about the precise definition but the key concept of passive income leading to some form of financial freedom or independence when you no longer worry about having to work as we traditionally know it, that we have to trade our time, experience, skill sets for money.
With that definition, what are the various passive income ideas? Let me list a few:
- Investment income from dividends
- Coupon payments from bonds
- Rental income from investment properties
- Capital appreciation from stock investment
- Interests from bank deposits
- Online business income such as affiliate marketing income, e-commerce income
- Publishing a book and getting royalty from book sales
Of course, there can be slight variations to the above. For example, when you have a blogging website with lots of traffic, you can also generate income from advertising revenue through Google Adsense etc.
The other consideration is whether when you say passive income, if that actually means totally passive whereby you don’t have to do anything at all.
I think how passive it is depends on the source of the passive income. Collecting interest income from the banks involves minimal effort except for the initial opening of the account. You may have to renew the term of the deposit if it is a term deposit and perhaps negotiate for better rates.
For rental income from properties, again it may involve efforts to upkeep the maintenance of your properties, engaging agents to rent out your properties etc.
For online business, the initial part of the work can be quite a lot but subsequently it is about keeping the website refreshed with new and quality content every now and then.
Therefore passive income may not necessarily mean you do zero work but it is minimal work and you will definitely enjoy the freedom of time and plan your life schedules according to your passions and priorities centered around your loved ones.
It is this strong notion that I have personally worked on developing 3 main streams of passive income around property rental income, investment income and internet business income. We have thus far focused our blog and Facebook page on stock investment.
Journey With Money will be launching articles on Internet Business opportunities. Do also look out for our course Internet Entrepreneur Accelerator Program (IEAP).