What is Passive Income?

What is Passive Income?...

With people tired of working 9 to 5 shifts, passive income has become a popular option for many. The term has been defined differently by various sources.


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What is Passive Income
This, in turn, leads to confusion to some about what is passive income in reality.

There are people who mistake passive income for income generated without any exerted effort.

While this may be true in the later stages, it is not applicable to the earlier stage.

Here's why...

Passive income may be attained when you are generating income without directly getting involved with the hard work.

This means to say that even when you are not working on your venture for eight hours, income is still generated for you.

However, this does not mean that you can generate income without doing anything at all. In reality, you need to do the real job yourself during the earlier stage.

So, you may ask, what is passive income really?

Here are the things you should know...

The money you earn without spending large amounts of time is what is called as passive income. For some it comes in form of investments, for others it comes through royalties.

What this means to say is that you initially invest time and money in a business. When the business is up and running, it will generate income for you even when you no longer spend too much time on it.

In other words, create a system, let it work for you, generate income from the system, and find the road to financial freedom.

This is how you let money work for you instead of you working for money.

Passive income is also the income generated when you work hard right now and earn constantly for it later on.

One of the most popular ways to do that is to build a business, implement the system, pay employees to run the business, and keep the profit.

While some people own the business from the start, others start small and expand later on as the income increases.

By the time the business expands, you then literally let the money work for you even when you sleep.

After defining what passive income is, it is also important to note what passive income IS NOT. For a clearer view, here are some examples...

Sidelines that generate side income are not the same as passive income. Let's say you are maintaining a blog site and earning for it.

You cannot earn passive income from it unless you promote some ads on the page through affiliate marketing.

On the other hand, salary raises are also not considered as passive income. While additional income is generated for the same amount of time worked, you still need to work for a period of time for it.

A raise is just an increase in the income of an employee. It is therefore not equal to passive income.

After defining what is passive income and what it is not, you have now a clearer view on which road to take towards financial freedom.

May this help you reach that road like many others.

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Daniel Dwase | Financial Freedom Coach

Learn from Financial Investing Experts. Your host, Daniel Dwase, has escaped the rat race and is financially free.