What is Passive Income anyway? Have you ever heard of it?

What is Passive Income anyway?

Some 8 years ago I was attending a business seminar and suddenly I pricked up my ears. What? What was he saying? The topic was Income and passive income was mentioned as one of the possibilities.

Until then, I had never heard of the phrase and for a while I kept wondering “What is passive income anyway?”

It was a solid business seminar and the question was answered thoroughly that day. Ever since I was intrigued and have tried several possibilities. I love learning new stuff and this was new to me. Although… not completely new, because unaware of the terminology I had been making a couple of passive income streams. 🙂

Do we need money?

Unless you buy pure gold with it, money is nothing more than an agreement. I used to say money didn’t matter to me and the world would be better off without money. Yet it has its perks.

If I would only exchange goods I would be very limited. Let’s say I have a lot of spring onions and I want pumpkins in the autumn. That would be a problem, wouldn’t it? But if I sell my spring onions I can buy the pumpkins in autumn.

Yes, I know, pumpkins are also available in spring. In present day society goods get shipped around the world all year round. 

First things first: work on your money mindset

How is your money mindset?

Chances are big I won’t keep any money in my hands if I say money doesn’t matter to me. Yet if I want to support organic farmers and pay them a just price for their goods, it’s better if I have money.

It still is difficult for me to value money the right way. I am raised in a blue collar family and my father’s favorite saying was “If you are born a dime, you’ll never turn into a quarter”. 

Some of my decisions in the past have been good because I liked being different from my family. Some have been less productive because I didn’t know the right tools.

Discovering a secret

Most of my life I was a self-employed graphic designer. If I was sick I had no income. Logical, is it not? No work, no income.

Can you imagine how amazed and impressed I was when I found out that some people could be ill or have a holiday and still have an income? And I finally found out how on that business seminar.

So, what is passive income anyway?

Equally important is the question: is passive income just for business people or can seniors have a passive income as well? I wrote an article the other day – 20 Ideas on how to make money after retirement – with some examples that can produce a passive income.

Personally I think the terminology is wrong. Passive implies you don’t have to be active. I prefer the term residual income. It’s extra money. But you’ll hear more about passive income than about residual income, so I’ll stick to that as well.

Probably the simplest explanation is, “It is income that is no longer directly related to the original effort”.

Is a pension passive income?

Yes, pension is a good example, because you get money for work you have done years earlier. This is one of the things I unknowingly did good as an entrepreneur: I put away large sums of money when my business was thriving. This pays me part of my pension nowadays.

Other examples of passive income are:

Royalties as passive income
  • Royalties. You get this for instance for books, music, pictures, graphic design. When you let people use your work on which you have the copyright you get a fee.
  • Investing on the stock exchange. Be aware that investing also brings risks.
  • Dividend on stocks.
  • Rent for property you own. This can be a house, but also for instance a field or a car.
  • Being an affiliate. An affiliate promotes a product or business and gets a fee for that. As an example: I am an affiliate of Wealthy Affiliate. There are more products we are affiliates of as you can see here.
  • Investing in a business.
  • Digital products you sell.

You have to invest first

Yet, this kind of income is not passive. You have to invest first. Either in money or in time. You have to buy the house before you can rent it out. You have to make the digital product to be able to sell it.

But once a good functioning system is in place, money will flow consistently in your pocket. This is what we call: get rich while sleeping! 🙂

What strategy can you follow if you have no money?

There have been times I hardly had any money. Life of a solo entrepreneur is difficult at times. The biggest problem is the panic that grows from worrying, because it clouds clear thinking. (Rutger Bregman explains it well in this article: Poverty isn’t a lack of character. It’s a lack of cash.)

Maybe you know the feeling. You might even think you not only fail to have money, but are out of time as well. And to eventually get a passive income you have to invest either money or time.

The best advice I can give you is to start with one small step. And make sure you try to come up with a small step, because overwhelm is a bad advisor. What  small step do you want to  take? 

Do you need help?

Although this article is about money and income, not everything costs money. If you would love to talk to someone to reflect on your ideas or to brainstorm for possibilities, than make an appointment with me for a 15-minute call. No charge.

And I am curious: what other ideas can we use to generate passive income? Tell us in the comment box.

12 thoughts on “What is Passive Income anyway? Have you ever heard of it?”

  1. A very interesting and useful read about passive income. I feel building streams of passive income is the way forward in today’s time and age. You’ve recommended some very useful way to do that.

    This article will benefit many more people like myself out there.

    All the best
    Habib

    Reply
  2. That’s a great article. Passive income is a must. In fact, there should be at least three streams of passive income. Passive income won’t make money overnight. People lack patience and they leave the efforts in between. They not only lose money that they put in but also the time as they need to start from scratch again. Thank you for this article.

    Reply
  3. First there are only two ways to sell something. Sell products or sell services. Then we have to promote something that we are excited about. The subject about passive income is a very interesting one for me.
    You have a great post here. Keep trucking!

    Joe Joson
    USNavy Retired

    Reply
  4. Hey,

    This is a great article and I believe many people will benefit. With the way of the world at the minute in lockdown, and jobs being furloughed, there will be many people looking for a different type of income. You have explained the passive income model very well and I hope that lots of people come across your article and site so you can help them.

    Thank you for sharing and keep up the great work.

    All the best,

    Tom

    Reply
  5. Thanks for this article Hannie. I couldn’t have said it better. Changing my mindset when it comes to making money has been sorely needed. I grew up being told just get a job and you’ll be fine. Well, I’ve had many jobs now and employers. I’m ready for a change. And if others can make a living using passive income than surely I can too.

    Regina 🙂

    Reply
  6. Hannie Mommers thank you for sharing this fabulous message. Your article is excellent and the subject and situation that is difficult for so many people is excellent and explained in a clear and helpful way
    💫💖💫

    Reply

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