The Truth About Passive Income


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How to build and develope passive income streams on the internet and elsewhere.

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The Truth About Passive Income

  1. 1. ==== ====Earning Passive Income Is Fabulous ... if I can you can. VISIT THE WEBSITE FOR GREATMONEY MAKING ====Ive been to more seminars and read more books about passive income than I can count. Theymake it sound so easy. When you set out to generate more for yourself, you may find that theseseminars and books have left out some critical information.First, its important to know what passive income is and what it isnt.Passive income is income that comes in whether youre working, sleeping or playing. The AmericaInternal Revenue Service defines it as income from "trade or business activities in which you donot materially participate."Some examples include:* Rental income from real estate* Earnings from a business that doesnt require direct involvement or participation from the owner* Royalties from publishing a book or from licensing intellectual property* Earnings from internet advertisement on your websites* Dividend and interest* Interest on private mortgages* Income from vending machines that you own* Income from an online business that you have put on autopilotWhen I heard about this type of income for the first time, my whole world changed. I startedlooking for ways that I could buy or create assets that would generate passive income for me. If Iwanted to buy a car, I stopped focusing on saving money to buy the car. Instead, I focused ongenerating enough income for my assets to buy the car for me.At the time, I didnt have a lot of money. But everyone has to start somewhere, right? My firstexperience in this realm, other than interest on my savings account, was buying a candy machine,filling it with M&Ms and placing it in the lounge at my fencing club. I calculated the cost of a singleM&M and figured out how many M&Ms I would give the other fencers for their 25 cents. Since Ithen knew my profit margin per sale, I discovered that I was making an average $25 per month inpassive income after donating 10% back to the junior fencing program.Some people think they are receiving passive income when they are actually receiving residualincome. For example, an insurance agent may earn residual income as her clients renew theirinsurance policies. However, if the insurance agent leaves the company, that income goes away.If youre involved in a networking marketing or multi-level marketing company in which you have to
  2. 2. continue to work the business in order to receive income, thats not true passive income either. Ifyou can stop working the business all together for as long as you want and still continue to earnincome, thats passive income.The big myth about passive income is that once you buy or create an asset that produces it foryou, youre done. You may be under the impression that you dont have to spend any more timeon it or manage it.The truth is that there are varying degrees of "passive." For example, you can receive passiveincome from rental real estate, but real estate can be extremely time-consuming. Typically, whenyou buy a property, there is an initial stabilization process that can include anything from doingrepairs to finding and screening new tenants. Once the property is stabilized, you may be able tosit back and just receive rent checks for a while, but then a tenant moves out, or the water heaterbreaks or a tree falls on the roof, and you have to spend time on the property again.Thats very different from a certificate of deposit at the bank where you buy it, and thats it. Ofcourse, your potential income on the rental property is much higher than the potential income onthe certificate of deposit if you know what youre doing.Be conscious of the difference between passive and residual income, and of how exactly how"passive" an investment really is.Why is passive income important?Imagine if you didnt have to depend on a job, a spouse, your family, the government or anyoneelse for money. Thats what this kind of income can provide for you.In many traditional financial planning models, youre encouraged to figure out how much moneyyoull need by the time you want to retire. Upon retirement, you spend that money. This plan hassome serious flaws. First of all, what if you live longer than you expect and outlive your money?Second of all, what if after putting in so much energy to save that money, you would prefer toleave it as a legacy instead of spending it?The key to financial independence is this:PI > EWhen your passive income (PI) is greater than your expenses (E), you are in complete choiceabout what you do with your time because your assets will continue to pay for your lifestylewhether you work or not.The truth is that to be financially independent, you dont need to be debt free, pay off your house,make a ton of money or be a millionaire. You just have to have more income than expenses.Its that simple.Passive income allows you to have MORE CHOICES. You can choose to live out of joy andfreedom instead of debt and obligation.
  3. 3. On a more serious note, what if something terrible happened and you couldnt work anymore?How would you pay your bills? When you have enough passive income, you also have morepeace of mind.There are two parts to this formula. To become financially independent faster, you can increaseyour passive income, and you can also examine how to decrease your expenses.So how do you get more passive income?There are two main types of passive income. The first type is passive investment income. In orderto receive passive investment income, you need to have funds available to invest in these incomevehicles. If you have funds available to invest, you need to focus on doing an appropriate amountof research and due diligence to decide which of these passive vehicles are best for your situationand risk tolerance.The second type comes from creating your own income vehicle with little or no money. Forexample, you might start a website that generates revenue from ads or join a network marketingcompany that will allow you to continue to receive income when you are no longer actively workingthe business. Or you might start your own business or become an affiliate of someone elsesbusiness.If you have money to invest, you will probably be able to generate income more quickly thansomeone who doesnt. If you dont have any money to invest, you have to be willing to contributetime, energy, skills, resources, creativity or all of these.In my experience, the most realistic way to build passive income is to focus on incremental growth.Start by taking one small step. Dont try to generate an additional $10,000 per month in passiveincome right this minute. Focus on what you can do to generate $10 per month in passive incomeand go from there.What are 10 things that you could possibly do in the next 30 days to generate $10 per month inpassive income? Whats one action you can take this week?Article Source:
  4. 4. ==== ====Earning Passive Income Is Fabulous ... if I can you can. VISIT THE WEBSITE FOR GREATMONEY MAKING ====