In recent years, you have heard a lot of talk about passive income. It is presented as something very promising and attractive, advertising of various kinds of investments is built on it, financial fraudsters also focus on it, playing on the emotions of their victims. Many would like to have passive income, but do not fully understand what it is. Let's fix this issue.
When a person earns money in the traditional active way (for example, goes to work, freelancing, running a business, etc.), labor and time are the main factors in his earnings. That is, in fact, he sells his labor and time for money. The more labor and time a person puts in, the more he earns. This is the essence of active earnings.
Everything seems to be fine, but there is one thing: labor and time are limited resources! A person cannot endlessly increase the investment of labor and time for earning money. Therefore, his active earnings are always limited by the amount (and quality) of labor and time that he is able to spend for this purpose.
This is not the case with passive income. Here the main income-generating factor is capital. That is, money invested in some kind of assets in order to create new money. Money creates money. This is passive income. A person can also invest labor and time to receive passive income, but these factors are not the main, income-generating factors here. And their investments, as a rule, are small.
Feature 1. To receive passive income does not require large investments of labor and time. Passive income is generated by investments - capital investments.
Capital, unlike labor and time, is an unlimited resource. It can grow indefinitely. Accordingly, passive income can also grow indefinitely - it is not limited by anything. This is its second feature.
Feature 2. Passive income is not limited by anything, unlike active income. It can grow indefinitely.
Capital investments, that is, investments made to generate passive income, are always associated with risks. And these are the risks of not only not receiving or not receiving income, but also the risks of partial or complete loss of the investments themselves. The level of risk can be different, it can be both very high and practically zero, but there is always some risk.
By the way, active earnings also have their own risks. For example, if a person is fired from his job, he will lose his active income.
Feature 3. Passive income is always associated with risks.
And finally, thanks to passive income, a person can reach the highest level of financial condition - financial independence. That is, the state when incomes come regardless of the investment of labor and time, the revenue side of the budget significantly exceeds the expenditure side and a person does not need to earn an active way. If desired, he can do this, for example, for the purpose of self-realization, but not for the sake of money. A person in this state becomes independent of money: his money works for him, and not he for the sake of money.
Feature 4. Passive income can lead to financial independence.
These 4 features of passive income make it so attractive. And there really is something to strive for. The main thing is not to forget about the important feature # 3, that is, about the risks.
