What is passive income and why should I care about it?
Author: Lyndsey Yates
Lately I’ve been looking into passive income streams a lot, and I’ve found out some really interesting stuff. I want to do a small blog series on my findings, but I thought I best kick off by explaining what passive income is. And why (especially if you’re a freelancer), you should care about it.
So, what is passive income? In my own words, it’s a way of making an income where your time is invested in the beginning, but not continuously. A well-known example of this would be an app – a lot of work goes in at the beginning, but once the app is launched, minimal effort is required in order to keep the money coming in. Other examples include:
- blogging (revenue via advertising, affiliate linking and advertorials)
- selling stock photography or images
- digital products
- real estate (stick your spare room on Air BnB!)
- and referrals.
There are only so many hours in the day
The reason I’ve been looking into it is because I wanted a method of making money that doesn’t follow the standard time-in-exchange-for-money income stream (active income). Why? Because there are only so many hours in the day, my time is not infinite. With active income there is a limit to how much I can earn. I could put my prices up, but there is also a limit to how much people will pay for any given service. A decent passive income stream could mean more time available to spend with my family, working on other projects, or simply enjoying the best of what life has to offer. Something, I’m sure, we can all do with a bit more of.
Passive income isn’t (usually) a get rich quick scheme (although there are some amazing success stories), but it can be great for keeping a steady trickle of income coming in when active income dries up (one of the downfalls of freelancing). If you set up multiple passive income streams, and that combined trickle could be enough to pay your share of your rent, mortgage or bills.
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