In its broadest definition, passive income refers to any income you receive regularly from investments or business activities where you exercise minimal direct participation to maintain that income. The beauty of knowing how to create passive income is that after you have completed the initial effort, the income, ideally, should continue coming in even without your active participation, hence passive.

In contrast, earned income is income you earn from performing a proportionate amount of effort such that zero effort equates to zero income. If you plan to retire comfortably, you must realize this early that you cannot rely on just your salary or earned income since earned income stops as soon as you stop working. You need to explore every opportunity to create passive income that can regularly provide income for you even after you retire.

To illustrate, think of passive income as buying a pair of chickens. You invest a bit of money and effort to raise that pair and before long, the hen starts laying eggs, some of which you keep for breakfast and some you leave to hatch. Soon enough, even without your intervention, you have six more chickens in the yard. A couple of months later while you were away (passive), the cycle repeats and you now have a dozen chickens where once there were just two. And so on…

Aside from raising chickens, here are some common activities where you can find an opportunity to create passive income:
• Rental properties: a tad bit too expensive an investment but if you have the money to buy or build apartments and have them rented out, rental properties can provide you a steady stream of passive income for the long term.
• Rental spaces: if you have vacant properties near busy commercial districts, you can rent out parking spaces on an hourly or daily basis. And why not offer car wash services as well while the cars are parked there. Just make sure you hire someone to do the carwash otherwise this income won’t be so passive.
• Rental rooftops: sounds strange? Telecom companies and advertising contractors rent rooftops on a monthly basis to erect cell sites or ad billboards. An almost 100 percent passive income opportunity, you practically have zero investment here although you may need to have high tolerance against strong radio waves and nosy neighbors.
• Royalties from Intellectual Property Rights: if you’re the intellectual type, you can earn passive income from copyrights or patents of your songs, videos, designs, literary works, inventions or other intellectual properties you own. Here’s a fun fact: way back in 1977, this blogger submitted a term paper on “The Viability of Bottling Potable Water”. The whole class laughed at the idea. Had I seriously pursued that concept of bottled water, I would have been a gazillionaire today, making millions in passive income everyday. Oh well, at least I know that idea was a winner.
Make Money Online: the internet has opened the opportunity for practically everyone to make money online and earn passive income via affiliate links and ad clicks. Although a lot of time, effort, knowledge and money may be required initially to run a website profitably, in the long run, it may be possible to earn passive income almost automatically without your active intervention. As far as this blogger is concerned, this is all still wishful thinking, but the potential rewards in the long-term make the opportunity to make money online well worth trying.

Passive income is not exactly passive. A lot of time, effort, and investment will be required of you initially. You need to find and create the opportunity to earn passive income. It’s not going to be easy, but you know the rewards for your efforts will be great.


leafLet said...

Wow I am like reading from Entrepreneur Magazine, less the subscription. Cool!

Mel said...

Here is another posts on creating passive income streams. Hope this helps others.