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What is
Passive Income?
There are 3 types of income; earned income, portfolio income and passive income.
‘Earned income’ obviously comes from earnings, which has a linear relationship with time i.e. getting paid per hour, meaning there is a limit to how much you can get paid.
‘Portfolio income’ comes from interest on bank deposits, dividends from shares, etc.
‘Passive income’ (also called residual income) comes in the form of income from rental property, royalties from patents or income from network marketing.
The definition of ‘residual income’, according to Wikipedia, is ‘income earned on an ongoing basis for effort done once in the past’.
If this concept is new to you, please read on...
You might be surprised to find passive/residual income is present in many industries eg. the insurance industry. When a customer renews their policy eg. a ‘will’ agreement, the agent who represented the company receives an on-going yearly commission, for as long as that policy is renewed. That’s an example of passive income.
In business, most business coaches around the world will recommend including some element of passive income in your product portfolio. For without it, you’ll always be directly involved in your business. You’ll always be working on activities that generate revenue, and there’s only so much time you can put into your business.
Now that you’re aware of passive income, there’s no turning back!
A strategy that includes passive income means that you’ll eventually become non-essential to the income that your business generates. It might take a lot of work in the beginning, to set something up, but once you have done the work, income will be generated automatically, on an ongoing basis. Does this sound good? It should do – people go into business to create money and more freedom for themselves, don’t they?
So passive/residual income should be starting to change the way you think about money, the way we’ve been taught about money since our school days. Move from a ‘poor’ man’s way of thinking to a ‘rich’ man’s way of thinking, because passive income is the difference between the poor and the wealthy. Maybe now you can start to think about ways of incorporating passive income into your business and how it will affect your life.
For those of you without a business, the advantage that network marketing offers is this: it’s a low-cost method of starting a business and it has a business model ‘built-in’ (already in place) so you can start reaping the benefits of passive income straight away.
Passive income and owning your own business puts YOU in control of your life. It enables you to create options, choices for you and your family - more TIME to enjoy doing the things you like to do rather than what you have to do. You can even pass on the wealth to your children, in the form of a legacy.
So, is it intelligent to find out about passive income and then ignore it? I think not. Why not?
Because the vast majority of the world’s population are forced to work for a living, millions in poor working conditions and with low pay. And the rest of us are only just surviving, earning just enough to pay the bills and keep food on the table. Even those of us who are well educated and with well-paid jobs will never be truly wealthy, until they find out about passive income. But it’s not enough to know about it, you have to do something about it.
The next step is to combine passive income with the principle of ‘leverage’.
Aiming Higher,
Darren & Les Shaw
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