What Exactly Is Passive Income?

October 19th, 2007 | stacey | Financial Freedom, Financial Independence, Multiple Streams of Income, Passive Income, Passive Income Online, Passive Income Opportunity

There are many popular terms, such as passive income, used to describe earning money and achieving your financial goals. What do all these words mean and why are they so important to you?

Basically speaking, there are three types of income you can make – earned income, portfolio income and passive income. When you earn your income, you go to a job and work for someone else for a certain amount of hours at a said salary. Portfolio income is earned from stocks and bonds. Earning money is a limited proposition with little room for expansive personal or financial growth. Portfolio income is impossible unless you have a substantial sum of money, which seems difficult to save when you are working for wages.

This is where passive income comes in to help people attain financial freedom. Various types of passive income is earned from investments such as real estate or property, royalties from creative endeavors such as books or songs and royalties from license or patent agreements for creations or inventions. You can also earn passive income from interest on a savings account or affiliate marketing and website endeavors. Money is received by you on a regular basis with no additional effort required for the original work done on the project. It involves a great deal of effort to set up passive income and multiples streams of income at the beginning but it is well worth the effort later.

Although passive income does involve some effort to get started, the financial freedom you appreciate down the road is definitely worth the effort.