Passive income from scratch

For many, the definition of passive income is a big question mark. For a few, it can be a way of living. In any case, having a source of passive income can make a big impact in your personal finances!

Which is why in this post I want to explain what Passive Income means to me while giving you some examples. In my next post I will give you some more concrete examples of hoy I’ve started generating some Passive Income for myself, even on a small scale. But now I’m getting ahead of myself! Let’s start with some quick definitions, shall we?

When you google Passive Income, you will find loads of definitions and classifications. It can be a bit overwhelming. I will try to put things simple for you. Below you will find the two main types of income that an individual can produce:

  • Active income: It’s the hard earned money generated in exchange for performing a job or service. Your time literally equals money. As you can imagine, with this concept we talk about wages, salaries, commissions or tips. An active income will provide a consistent income stream and will allow you to have some money in the short term, as well as during an extended period of time.
  • Passive income: In my opinion, Passive Income is the money you can earn consistently, but requires a very small investment of your precious time to keep generating stable income.

I’ve recently read an interesting publication from the Resolution Foundation. Basically it states that the Top 1% of household’s in terms of wealth accumulates the 23% of the wealth of the whole United Kingdom. If this interests you, there are more details about it here:

https://www.resolutionfoundation.org/press-releases/top-1-per-cent-has-almost-800-billion-more-wealth-than-official-statistics-show/

https://www.resolutionfoundation.org/app/uploads/2020/12/The-UKs-wealth-distribution.pdf

So, unless you already belong to this Top 1% of people, or you have recently inherited some money or properties, you might need an active source of income in order to acquire some savings. This will help you to generate a future source of Passive Income. And that is perfectly fine! I am part of this remining 99% population, and I’ve been working non-stop for last 15 years… even nowadays, I still work part-time. If you want to know a bit more about me and my journey, you can read more details here.

My goal in providing you with all of this information is to introduce a third class of income: the active income that becomes passive after some time, and it’s commonly called Residual Income. In my experience, generating truly Passive Income requires some initial work to set things up.

To make sure we are all in the same page, let me give you some examples of each income category mentioned above:

  • Active Income:
    • Salaries & wages.
    • Commissions.
    • Tips.
    • Income from your own business.
  • Passive Income:
    • Open an interest savings account.
    • Rent a parking space.
    • Hold dividend-yielding stocks.
    • Benefit from referral programs.
    • Use Passive Income Apps.
  • Residual Income:
    • Start a blog.
    • Royalties from a ebook.
    • Instagram Sponsored Posts.
    • Develop an App.

As I have previously mentioned, in my next post I intent to give you some real examples of how to generate Passive Income that I’ve been investigating and putting into action. You’ll be able to see the results of the different forms of Passive Income that have been working for me! Also, I will give some heads-up of common negative thoughts might stop us to start working on Passive Income ideas.

As always, thanks a lot for for checking out this blog and for taking the time to read my ideas.

See you back here soon!

#zerotohero #passiveincome #nomore9to5jobs

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