What’s the difference between passive and active income?Īctive income involves earning money in exchange for a service. There may still be some monetary costs involved, but the bulk of your investment will be time and effort. If you don’t have a lot of extra cash on hand, you will need to manually work toward building your passive income asset. Rent out your basement, attic, or garage.Think of them as a way to “put your money to work” to generate returns for you in the background. These types of passive income streams usually require minimal effort. If you are sitting on a bunch of idle cash, you can put that cash directly into an investment. And no matter what those income-generating assets are, there are only two ways to build them: Approach 1: Invest money Passive income doesn’t magically drop from the sky. The Two Approaches to Generating Passive Income Some examples of passive income include investing in the stock market, real estate, and even the income generated from an online business venture. Instead of trading your time for money - like most people do at their 9 to 5 jobs - passive income is all about having money trickle in even while you’re not actively working. Passive income, also known as residual income, is money you earn while you’re not actively working. And even though earning passive income is unlikely to solve all of life’s problems, it’s not a bad place to start - especially if you have the dream of one day reaching millionaire status. There are plenty of reasonable ways to generate passive income that you can start today. However, if you are up to the challenge, don’t let the promise of a little hard work deter you. If it was easy, everyone would be doing it, right? In many cases, they’ve leveraged the power of passive income to accelerate their wealth building.Īnd even though it sounds great to kick your feet up on a beach somewhere and watch the money roll in, the reality is that building a steady flow of passive income will usually require a fair bit of effort. They say that the average millionaire has seven different streams of income.īut most millionaires don’t have seven different jobs. If a purchase or signup is made through one of our Partners’ links, we may receive compensation for the referral. Our number one goal at DollarSprout is to help readers improve their financial lives, and we regularly partner with companies that share that same vision.
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