What’s passive income? Derived from real estate and business investments in which the individual is not actively involved, such as a limited partnership. Take this example, if you own a self-managed property that returns rental income to you, that’s passive income. If you write a book, then the royalties from that book are passive income. If you create a web site, income from ads on that site are passive income. I view the archives of some of my web sites archives as passive income, since I don’t actively edit or modify those pages anymore.
What about income off of stocks and investments?
Sure you can look at these as passive but has relatively low returns and it takes a lot of capital just sitting there to make you any kind of real money.
What’s the point?
The point is that if you can accumulate enough strings of passive and make enough to match your primary income, it will become your primary income. This is a way to gain freedom from your employer and give you more time to create more passive income.
Creating passive income?
The first thing you need to do to start building up your income is to start spending less than you’re bringing in. If you’re spending everything you make each month, you won’t have anything left over to invest into earning passive income. This means you have to be cheap and you also that you have to pay off those high-interest debts and credit cards, as these merely drain money and lets someone create passive income on you. Once your finances are in tip top shape, start saving for and investing in things that see some kind of rate of return, such as rental properties, animals or web sites. Anything that requires a primary one time investment and pays you back over and over, that is what you invest in. When you’ve got an asset that can run on its own, then start saving for another, and another, and another, until you have enough passive so that you can cover your monthly expenses.
At this point, you’re very close to leaving work, but keep at it until you can cover your monthly expenses and also invest a healthy amount of the income into more assets.