Passive Income Series: PART 2 | PART 3
What Is Passive Income And Why Is It So Important?
Passive Income is an oft talked about, and often miss-understood concept.
Everyone seems to quote Warren Buffets famous saying…
“If you don’t find a way to make money while you sleep, you will work until you die” – Warren Buffet
…without really knowing how to achieve it.
So lets briefly look at what Passive Income is (and is not).
What Is Passive Income?
What Warren Buffet is describing here is the ability for your work and investments to be generating profit for you whether you are working on them or not.
To further understand this we need to realise that there are three types of income.
- Passive
- Semi-Passive
- Active
Starting from the bottom up, Active Income is the more traditional way of earning exchanging time and effort for income (e.g. a Job or running a traditional business that requires your day to day involvement.
Passive Income is generally described as an income stream requiring little or no input from the individual to continue to receive and grow said income.
Passive income is traditionally thought of as income that is not proportional to the time you physically put in to achieve it. Examples of passive income may include royalties earned from songs, stock photography or a digital course that you create. In all of those cases, the content you have created generally require little or no maintenance or financial investment to maintain the source of income.
We’ll be covering 30+ ways of generating genuine passive income over the next month in great detail
The really interesting thing about Passive Income is that it is an income that can literally be created while, as Warren Buffet said, you are sleeping, freeing up additional time for either hobbies, family, or using the time to earn more money through other work or income streams.
As an example, a person could have an investment or write an eBook that is providing a regular, passive, income at the same time they are working a traditional 9-5 job. Regardless of what is going on in the ’employees’ life, the book or investment continues to provide another income on auto-pilot.
And finally, Semi-Passive income is, as you’d expect, similar to Passive Income but requires some, but reduced, amount of ongoing work or maintenance to support it. It may be fulfilling and processing orders or writing the occasional article or update to supplement or maintain the income stream.
Why Is Passive Income So Important?
To understand why Passive Income (rather than Active Income) is so important is quite easy. It is a simple equation between time and money.
Time is, quite simply, the most valuable commodity that any of us have. It is the great equaliser.
There are only 24 hours in a day. No single person can have more or less time than that. We all start from the same spot.
It can never be recreated or re-spent. It exists once and then it’s gone.
And that is exactly why Passive Income is so important – because time is more valuable than money.
Money can be earned, saved, spent, wasted, invested, gambled and lost.
We can’t store time away for a rainy day. We can’t save it up and use it at another time. It’s there then its gone, never to return.
I’ll say it again, time is the most valuable commodity that we have.
As we all need to earn an income to live, and that income usually takes up most of our waking lives, it means the time we have available to us most be prioritised and if we can use that time to create passive investments and income, the more time and options it will create for us in the future.
The best time to start investing in passive income was yesterday. The next best is RIGHT NOW