Initiating a business of your own makes way for earning what you really should be earning and for realizing opportunities that are far and away from what you would encounter as an employee. It’s not that working for someone else is a bad thing. Many people have worked in jobs they didn’t like and, at the same time, enjoyed their nights and weekends because those hours were their own. But the business you’re dreaming about, the income you imagine yourself bringing in—that’s all part of a vision that, right now, may seem kind of hazy but also exciting.
Understanding Passive Income
Income from investments or business ventures that do not need constant active involvement generates the next form of nonworking income: passive income. A person in a passive income scenario does not need to work a fixed number of hours to earn a paycheck. After the initial setup, ongoing work may be limited, and with some setup, you may be able to design a system that earns you money with minimal effort. Income from rental properties, dividends from stocks, and automated online businesses can all serve as sources of passive income.
The real challenge for entrepreneurs is to change their current business model into one that can create passive income. Service-based businesses often require the owner to be directly involved, making them less appropriate for generating passive income. Still, by outsourcing tasks and delegating responsibilities, business owners can employ a system that makes more money than the owner does while allowing the owner to do something else or to do nothing at all.
Business Models for Passive Income
Numerous business models can act as vehicles for generating passive income. The classic options involve substantial initial investments and operate on a self-service basis, enabling owners to make money without constant supervision. Some of these options—like vending machines—require diligence in restocking and maintaining the service. Others—like laundromats—require less involvement and more “set and forget” oversight.
Venture opportunities requiring significant capital may not be an option for some people. The internet, however, provides many accessible avenues for generating passive income. You could:
– Start a blog or website and use Google AdSense on it.
– Engage in affiliate marketing.
– Create and sell digital products.
Even if you don’t want to set up a full website, you can append an online storefront to a platform like eBay and sell almost anything, as long as you have it in your possession and are willing to ship it to a buyer. Services like CafePress and WebStore let you set up a continuing sales operation that requires very little oversight. If you don’t have any products of your own to sell, you can use Squidoo to help you get started on making money through a website without any sort of investment.
The Importance of Active Income
Desiring passive income is one thing; appreciating the need for active income is quite another. Achieving financial goals typically takes two kinds of earnings. Active income is the more common. It’s what we earn from our direct labor. Most of us earn it in the form of paychecks, though we might also pick up a few bucks from tips or other less formal means of compensation. If you’re reading this on your lunch break, I can pretty much guarantee that you’re not at a part of the book where passive income streams are really being highlighted.
What separates active income from passive income is the amount of work that is required to keep the money coming in. Active income requires you to keep working. If you don’t, the income stops. On the other hand, passive income can keep coming in without a person having to work all the time. After you set it up, it mostly runs by itself. This is the main reason why moving from active to passive income is such an important strategy for people who are looking for long-term financial results.
Conclusion
To conclude, making passive income should be part of everyone’s path to financial freedom. To cover the three F’s—freedom, flexibility, and financial security—it’s better to have the income flow to you than to have you flow to the income. You can use mastery of any form of income to create and sustain income that comes without your active participation. There are countless opportunities for generating that kind of income in the digital age. And as with building one’s bank balance, the earlier you get on to making that kind of dough, the better.
