What You Need to Know About Passive Income

Passive income has become a hot topic and for good reason. Who wouldn’t like to generate income without putting in a hard day’s work? From teenagers seeking recurring revenue from advertisements on social media to retirees turning their hard-earned nest eggs into a reliable income stream, more people are interested in creative ways to create passive income than ever before.

Despite this enormous interest from all ages and walks of life, securing passive income streams is especially critical for retirees. This is because, over the past several decades, the responsibility has increasingly fallen on individuals to fund their own retirements. Gone are the days of working for the same company for 40 years and retiring with regular pension payments. Sure, an employer may set up, or even contribute to, a retirement plan. After that, however, it’s your responsibility to save enough for retirement, while navigating the hostile waters of financial markets while in retirement. Social Security may cover a portion of these needs, but, more than likely, the majority of retirement income will come from the fruits of your labor through saving, planning, and executing a sound income strategy.

Therefore, because passive income will play such a central role for most retirees, it is vital to have a clear understanding of precisely what passive income is and which sources of income will allow you to realize the retirement you envision.

How Can You Generate Passive Income?
While most people have a vague understanding of what passive income is, let’s drill down a bit further to gain a more precise grasp of this critical concept. Passive income is often contrasted with active income, or the income earned for a specific job — in other words, the income earned for a hard day’s work.

Passive income, on the other hand, is income earned from an activity in which you are not actively involved. Income from rental property, for example, is perhaps the most common activity associated with passive income. In a perfect world, tenants’ rent checks roll in every month without having to actively work for those payments.

Business ventures, too, can become passive income streams if they can generate income without active participation, or where the work is done up-front. Royalties from book sales, income from pre-recorded educational courses, or flipping retail products are all examples of this sort of passive income.

The digital age has also opened an entirely new realm of passive income sources where YouTube channels, social media posts, or other digital content can earn money years after its creation through revenue from advertisements or direct payment from customers.

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