How can passive or residual income improve my lifestyle?
In order to undertand how passive income can increase your quality of living, it is first important to understand the difference between active and passive income.
Active income is when you trade your time for money. People who are paid hourly or by salary, are earning active incomes. They are either trading one hour of their time for a certain amount of money or one year of their time for a certain amount of money.
Passive income is when the work that you do ends up providing income for an extended period of time or, in some cases, indefinitely.
Authors, artists and musicians are all examples of people who earn they’re livings primarily from passive income, if not entirely.
It is very important to understand that passive income is not a “get rich quick” method of making money. In fact, I almost see it as a “get rich slow” method of earning a living.
A common misconception of passive income is that a person does something once, never updates it, improves upon it or expands on it and ends up never having to work again in their lives.
People who earn passive incomes work very hard and often long hours.
You may then ask, “if I’m going to have to continue to work while earning a passive income, then what is the point?”
My answer to that question is rather simple: In the long run, earning a passive income can take stress out of your life.
The reason for this is because, when someone earns an active income, they are most likely earning 100% of their income from one source. If that source of income disappears for whatever reason – economic changes, the company decides to restructure, etc – then all of a sudden, you have absolutely no source of income.
On the other hand, people who earn residual incomes, generally earn their money from multiple sources. They have written multiple books, own different websites or have multiple pieces of artwork that can be resold. If a passive income earner loses one of their sources of income, they will still be making money from their other sources.
I do not like the idea of a company being in 100% control my entire income. I want to be in control of my own income.
By doing this, it really takes a lot of stress out of your life. You will still have to work hard and provide value to society but you can rest easy knowing that no matter the future brings, you will most likely not all of a sudden lose all of your income.
As I mentioned earlier, it is not a “get rich quick” scheme and it often takes a long time to build up enough passive income to no longer require an active income.
That being said, for those of you interested in passive income, I recommend that you start building different streams of residual income while you’re still earning an active income.
Throughout the process, the financial stress you have in your life will slowly dwindle away until you eventually reach a point where you have complete control over the money that you make!