How Would You Define Passive Income by Chris Steiner

Do you know what passive income is? If you aren't sure, or it is a term you haven't heard before, this article can help you understand just what it is and why it is important to your financial future.



Passive income is just what it sounds like. It is income you receive without having to work in an active way to get it. The flip side of this is active income, which is what most people have. The most common active income is the money you get in your paycheck every month, for which you have to trade 40 hours of your time each and every week.



It is important to understand the distinction. Active income stops when you stop working to get it. Your boss is not going to keep paying you if you stop showing up to work. If you sell things to make extra money, that money stops coming in when you stop selling. All active income streams are dependent on your action.



Passive income, on the other hand, does not require ongoing effort. Often, you can do work once and the income will continue to come in for months or even years without you having to do anything except maybe cash the checks.



You may be asking yourself why more people don't have passive income if this is such a great thing. The truth is that many methods of creating passive income require a lot of effort or discipline to create the passive income stream, and unfortunately, most people are not willing or able to get them started.



Many sources of income can be either passive or active, depending on how you set them up. Owning a business is a great example of this. There are several different ways of becoming a business owner, and they are as varied as buying stock in a public company and bootstrapping a start-up business.



If you have money and you are willing to do the research and learning involved in making an intelligent investment, buying stock may be the answer for you. Dividend payments are the company's way of disbursing profits to the owners, which becomes your passive income stream. Any increase in the value of the stock itself is also passive income, though you only receive it when you sell the stock.



Creating your own business is another way to create passive income, but for most business owners this never becomes their reality. It can take a lot of patience and effort to build up a business and hire the right employees and set up the right amount of automation to make it hands off for you as an owner. But if you do so, you can enjoy years of passive income from this source.



Interest payments of all sorts, including from bank deposits, bonds and other financial instruments would also be good examples of passive income. Additionally, royalties and licensing fees provide their owners with another stream of income that is passive.



Another great example of a form of income that is passive is rental income. Especially for property owners who employ management companies, rent payments get deposited into your bank each month without you lifting a finger.


You can even create a passive income stream by creating small businesses online. This can take some effort, but once it is set up and automated, you can continue to make money for quite some time. If you'd like some help in setting up an online business like this, check out http://www.the-make-money-blog.com/.



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