What is Passive Income?
Passive income is a hot term nowadays. No doubt you have encountered all kinds of hucksters touting all sorts of spurious “passive” income business opportunities online and in your daily dose of junk mail. But what is passive income, exactly?
Passive Investment Income
Passive income in brief refers to revenue earned without any active participation on your part. The most familiar forms of passive income are investment revenue - for example, interest earned by a bank account. You need do nothing more than park your money and receive your payments. Rental real estate is another oft-cited example (alhtough considering the amount of ongoing work it takes to manage rental properties, it’s hard to see what is “passive” about this income stream.)
The Best Passive Income Opportunities
The best passive income opportunities focus on investing your time, rather than capital. The key is that you must find a way to work once, but be paid many times. A novelist, for example, works a great deal up front to produce a book, but can potentially earn a lifetime of passive income in the form of royalties once it’s finished. Similarly, residual income from sales of services like credit card processing is a great way to build up a steady stream of passive income. Each sale pays over and over again for as long as the customer stays with the service.
Passive Income Online
Of course, as you might imagine, my personal favorite way to build passive income is online. I’ll write more on how to do this in my next entry.