Guide: What is Passive Income?

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Passive income is income that does not require your direct involvement. Unlike income that you earn via your normal day job where you have to be involved in doing work to earn the monthly income to pay for your food and bills.

A few kind of passive income that we are familar with includes Property Rental, Dividends from Shares and Interests from Banking Accounts

However, there are other ways which are not as well-known methods of generating passive income including affiliate marketing, royalties from invention or creative works and network marketing. Though some work has to be done constantly so as to generate income via these methods, but one could generate income while doing things that they like. For example, if you like to take photographs, you could submit your photos to stock photography and get paid royalties whenever someone buys your photo.

Probability at the back of some of your minds is saying “Hey, if we have to do work, then it is not considered passive income anymore!“. Well, who says income generated via property rental or shares dividends does not need to do any work? We do work by sourcing for properties or shares when we are preparing for investing and these may be a constant and tedious process. As the saying goes, “There is no free lunch in this world.“.

Warren Buffett treats himself as the business owner of all his invested companies. This is what I feel is very true when you are generating passive income through all the methods that was mentioned earlier.

As a business owner, one must be thinking of 3 questions:

  1. Can I create a product that can create repeated sales?
  2. How can I engage people to sell for me?
  3. How can I make money off the work of others?

Everyone has only got 24 hours a day and business owners always think of how to leverage on other people’s time to generate income for them. When you have a product that sells, only then you will be able to generate a true passive income.

The sooner you have your answers to the above-mentioned questions, the sooner you will be able to achieve your financial freedom through passive income.

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