There is just something magical about the concept of passive income. Just imagining that I can lounge around and leisurely make money while actually doing nothing at all sounds like it shuld be a crime. Still, myriads of people are currently doing. Truth be told, many of them have been doing it for years.
First of all, we probably need an understanding of what passive income is. The truth of the matter, however, is that everyone has his or her own definition of the term. On my part, I tend to think of passive income as income that does not require the earner to have an active role in revenue generation. That's not to say you have no role (although you may not); it's just that active participation can be limited.
As an example, consider a pilot who has to fly from New York to London. Prior to leaving, he is fully engaged in handling the plane, going down the runway, and so on. However, once the plane is in the air, he can set the autopilot; the plane only really requires his involvement at takeoff and landing. (In other words, setting the autopilot let's things go into "passive" mode.) Likewise, there is limited involvement (and sometimes none) by the person earning the money in passive income activities.
Also, while I often use the phrases interchangeably, this is somewhat different than residual income. Residual income usually refers to income being generated by some initial work effort, but which does not require continued participation by the income earner. A good example of this would be writing a book or a song. The initial writing effort will yield on-going royalties without the writer having to do anything more. Thus residual income actually can be seen as a form of passive income. (Dividends - which I was referring to in the first paragraph above in terms of earning pasisve income for decades - can also be seen as residual income.)
In brief, passive income may actually require a little work. More than likely, the income earner will have to "check in" occasionally to make sure everything is okay - the exception being if you are earning some type of royalty such as in the example above. Regardless, it still beats the alternative - "working" - by a country mile. And then some.
First of all, we probably need an understanding of what passive income is. The truth of the matter, however, is that everyone has his or her own definition of the term. On my part, I tend to think of passive income as income that does not require the earner to have an active role in revenue generation. That's not to say you have no role (although you may not); it's just that active participation can be limited.
As an example, consider a pilot who has to fly from New York to London. Prior to leaving, he is fully engaged in handling the plane, going down the runway, and so on. However, once the plane is in the air, he can set the autopilot; the plane only really requires his involvement at takeoff and landing. (In other words, setting the autopilot let's things go into "passive" mode.) Likewise, there is limited involvement (and sometimes none) by the person earning the money in passive income activities.
Also, while I often use the phrases interchangeably, this is somewhat different than residual income. Residual income usually refers to income being generated by some initial work effort, but which does not require continued participation by the income earner. A good example of this would be writing a book or a song. The initial writing effort will yield on-going royalties without the writer having to do anything more. Thus residual income actually can be seen as a form of passive income. (Dividends - which I was referring to in the first paragraph above in terms of earning pasisve income for decades - can also be seen as residual income.)
In brief, passive income may actually require a little work. More than likely, the income earner will have to "check in" occasionally to make sure everything is okay - the exception being if you are earning some type of royalty such as in the example above. Regardless, it still beats the alternative - "working" - by a country mile. And then some.
About the Author:
Learn more about passive income and residual income at passivepursuitofincome. com.
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