Now tell me who doesn’t want free money? Be honest with me. I certainly do want free money. The truth is we have to work for our money. I know everyone wants money to be clocking in even if they are asleep but the problem is you need to have put in some work for this to work. The money that you receive when you do or invest in something is termed income. Income has two streams i.e active income and passive income. In this article, we are going to talk about passive income, to find out whether it is doable or not.
First, let us define our terms before we dissect further:
Income is defined as the amount of money that you receive in return for goods or services rendered or return on investments
Passive is defined as accepting or allowing what happens around you or to others without your active involvement.
Active means one is physically involved or present at a particular activity or event
Passive Income is defined as income that is earned on work that was done in the past and one continues to receive income from the same work without putting a lot of effort or work to earn or maintain it.
Active Income is defined as income that is earned after direct provision of a service i.e earned after exerting a specific effort.
Difference between Active Income and Passive Income
Passive income is based on the work that you do in the past and the same work produces income for you in the future in your absence. For example, writing a book that will still be selling years later or for generations to come. Most of the effort or lots of work is done when you are creating the work or investing. The return that you now get on a continuous basis makes your income be termed passive. You are not writing a new book whenever someone wants to buy your book. The book is already there on the shelves for them to buy and go read. Online courses are being created and anyone has access to them anytime and anywhere. The creator doesn’t need to be ‘there’ during the duration of the course. On the other hand, active income is when you perform a service and you are paid for that service and it ends there. There is no continuity of income as long you have not provided a service, for example getting a salary or hourly wages from your job. One needs to physically put effort every time so as to earn income.
These two income streams are important in their own individuality. Active income is needed for day-to-day living and also helps in providing capital for the creation of passive income products or services. Passive Income is important in that there are times in life where you are not able to provide physical effort in real-time thus you need money creation while you sleep so as to rest.
Examples of Passive Income and Active Income
Passive Income Active Income
- Interest earned from investments 1. Salary
- Rental Income 2. Hourly wage
- Affiliate Advertising 3. Commissions
- Dividends 4. Consultancy fees
- Display advertising 5. Freelance fees, etc
- Book sales, etc
Is Passive Income doable or not
What makes passive income doable is having a product that can be sold without you being physically there and can be sold so many times without you putting extra effort. The example I like giving is book sales. One writes their book, takes it to the publishing house where it is edited then printed. This book will be sold for years to come.
Passive income doesn’t mean you write your book and then put it under the pillow and expect people to buy it. No ways!!!!!!!!!!!! You have to let people know and see that your book is in existence. This is called taking it to the market. It might seem as if creating passive income is easy. It is not because you have to put in a lot of effort when creating your work. The fun part comes when you have created your work, created traffic for it and sales continue coming in without you doing much.
It takes years to build up passive income as there is a lot of work that needs to be done for the groundwork. For example, if you are investing, there are huge sums of money needed to invest or buy properties and assets. Here laziness is your enemy because if you are lazy you can’t expect to earn passive income from anywhere. You need to put a lot of effort so that you end up making money while you are asleep.
In conclusion, passive income is definitely doable as there are already existing examples. Some people are harvesting from this stream of income. All that is need is to create a good product or service that has a market and potential future market. In the comment section below let us hear what you understand by passive income and whether for you it is doable or not. Share your experiences.
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