Warren Buffet said that you should never rely on only one source of income. Sadly, for most of us working stiffs, time is a bit of an issue when it comes to taking his advice. Luckily enough, this is where the concept of passive income – i.e. earning money without actively working, comes in. In this article, we will explain this interesting concept and share some easy passive income ideas for you to get started on that second revenue flow.
Different Types of Income
The go-to solution when most people need additional cash, or rather the stereotypical option is a part time job. But, as we said above, most of us just don’t have the time or energy to put in those extra hours after we are done with our regular jobs. So, what are our options?
It’s generally accepted that are three main categories of income:
- active income,
- portfolio income, and,
- passive income.
Active income refers to the money we get for performing some kind of services and it includes wages, tips, salaries, commissions, and income from businesses in which there is material participation. A digital marketer who works for a monthly paycheck, for example, receives active income.
Portfolio income is interest, dividends, or capital gains derived from investments or money lent. It’s what is sometimes called “paper assets”. The way it works is that, just like investors in privately-held companies can receive a distribution of profits, owners of paper assets can also receive distribution in the form of dividends and interest.
So, What is Passive Income?
Passive income is generally money that’s earned regularly with little or no effort. Sounds great, we know. The US IRS defines passive income as coming from two sources or passive activities:
- rental activity, or,
- trade or business activities in which you do not materially participate.
People like to say that time is money, and while that is usually true, the opposite does not follow. Money is not time. Because, time does cost us, but once it’s spent, it’s gone. On the other hand, you can spend money over and over.
You can lose a bit of cash now, but make up for it and save more afterwards. In other words, there is a potentially infinite amount of cash, but a very finite amount of time. That is what’s so great about passive income, it allows for a second revenue stream, without actually requiring the time that activities like part-time jobs require.
A Few Easy Passive Income Ideas
So, now that we covered the basics, all you need is to know now is what your options are. What are the ways to make money with little investment of time and effort on your part? Here are a few easy passive income ideas:
Buy a blog. If you can get a blog with some decent traffic and an established cash flow, it could be an awesome passive income source.
Affiliate marketing. Sign up to promote products or services on your website and get paid either a flat fee or a percentage of the amount of the sales completed. However, you do need a website or blog with traffic.
Rent out space on Airbnb. Use your residence to accommodate guests from around the world and earn a few extra bucks or euros just by renting out the extra space in your home.
Receive SMSes for cash. Sign up for a service – like Money SMS, download the app and that is it. You are all set. With every text message you receive, you will get a certain amount of money while literally doing nothing.
All you need is your phone.
Time is much more valuable than money. And passive income allows us to actually earn money, without wasting any of our precious and very limited time. However, most passive income streams in the beginning require some sort of effort on our side – which is not always an easy investment for us, considering the energy that we spend daily on our regular jobs. But there are a few exceptions.
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