What is Passive Income?

First we need to understand that there are two types of income: active and passive.

Active income is money received in compensation for work given. The majority of adults in the working age are earning active income via salary or hourly pay. The moment they stop working, their flow of income stops.

Passive income is earnings derived from a rental property, limited partnership or other enterprise in which a person is not actively involved. It means very minimal effort is needed on your part to maintain the income stream. However, it does not mean no effort was put in to achieve passive income.

In the beginning, a minimal amount of effort and hard work has to be put into most passive income generators. Only then will you receive regular income without much effort.

Why is passive income desirable?

The attractiveness of passive income is the fact that once you stop working on it, you will still continue to receive money. This is especially important for retirees. But young people can also enjoy passive income. It will give them more time to do things that matter to themselves and the community, without having to worry about working to earn a living.

Most of us dream of having passive income such that we do not have to work ever again. However, passive income can still be beneficial even if it means only receiving $200 per month. Small income is better than no income. And usually if you can start making $200 per month passive income, you are capable of making more.

Start small is better than not starting at all.

What does ‘effort’ mean?

Effort means at least three things: time, money and work.

Adding on to that, but no less important is: commitment and patience.

All in all, the initial ‘effort’ put in is with the ultimate goal of creating or accumulating assets that can generate passive income.

4 ways to create passive income

  1. Start a business
  2. Invest in stocks
  3. Invest in bonds
  4. Invest in property / real estate

They don’t look easy, do they? All the above 4 points require capital, research and analysis.

Get started early and build your knowledge. You are a teen now it is never too early to start. The early bird gets the worm.

Good luck!

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