What Is Passive Income? And WHY You Want It.
Passive Income. What is it, and how do you get it. In this article, passive income will be defined, explained, and most importantly, why you need it. Passive income has increased in popularity as desires for a better life are explored. Look at the trend graph, and it will show you just that.
Passive income is money earned that is not actively requiring work to earn. According to the IRS, “There are two kinds of passive activities.
• Trade or business activities in which you don’t materially participate during the year.
• Rental activities, even if you do materially participate in them unless you’re a real estate professional.“1
In this paragraph, imagine sitting on a beach with a fancy umbrella drink and enjoying life. This is what most people think about passive income. While this may be true, there is more to the story.
What is passive income?
Possibly the greatest thing you could ever achieve financially. Can anyone honestly say they wouldn't like the idea of having income come to them without doing anything? This would be an awesome achievement, even if it is just extra and not retire to the beach money. To paraphrase Warren Buffet, “make money while you sleep.”
Examples of passive income
- Affiliate marketing
- Advertise on your car
- Blog
- You Tube
- Rental property
- REIT (Real Estate Invest Trust)
- Dropshipping
- Digital product sales
- Royalties
There are many other ways, but these are some primary methods and ones I have experience with.
Examples of non passive income
- Wages
- Business activity
- Actively trading stocks
- Partial home rental
Why passive income is important
Quite frankly, it is to take the burden of income off of you. In today's world, people are waking up to the fact that they don't want to give their life over to an employer. They want to be able to enjoy themselves but don't want to have to worry about finances. The pandemic has caused people to realize they must take their financial being into their own hands and not rely on an employer.
But many of these passive income ideas require work
That is 100 percent true. All of them require action. Make no mistake; there is a lot of work involved in creating passive income. The difference between passive and nonpassive is the work stops, and you get to enjoy the fruits of your labor.
Examples of the work required.
- Create a website
- Write content
- Create a digital product
- Find drop ship products
- Build an audience
- Create videos
- Hand your money over to investors, real estate trust. If you have the money and can trust them this is easy.
- Write and publish a book
So you can see there is work to be done, and the passive part comes after.
How can I make $1000 a month passive income?
This is by far the most common question that is asked on the internet about this subject. The part of the question that is missing is how long it will take. All of the examples have the possibility of making $1000 per month, but it takes time. A website with blog content typically takes a year. Investments depend on how much you put in. Real estate, how many properties do you have? Variables make this difficult to answer.
Shortcuts
- Advertising
- Use your skills
- Get a mentor
- Read books
- Watch YouTube videos
As they say, nothing good comes easy. So the approach I take, and I know many others do, is to pursue multiple methods of building a passive income. Don't put all your eggs in one basket. Starting when you are young is better, but it is never too late.
As I have said, all of the examples are things I have personally done. Some I stopped doing, and others are ongoing. So find the avenue that suits you, and you can work on it in your spare time. Also, don't tell me that you don't have spare time because everyone can find an hour here and there.
Finally, my favorites are REIT, affiliate marketing, and blogging. The REIT I use is Realty Mogul. They are not my sponsor; I just like them. Blogging is worth mentioning; when you start getting a decent amount of page views, you can add ads which would be another passive income. You can check out my article on affiliate marketing for more information on that.
Good luck with your journey, and I wish you much success in the future. As always, I look forward to reading your comments.
