Passive Income

All people receive their income from one of these sources:

A wage or salary

Profits from business

Fees from service or profession

Residual/passive income

Wage/Salary needs no explanation. You sell your skills and time wholesale to an employer, for an hourly or monthly pay. You have to generally work fixed hours, and get no more money just because you put in more time.

A professional or self employed person provides the benefit of his expertise, skills or special training to people, for a fee. The fee is charged by the hour or per visit (consultation), or a flat fee for the completed service (surgeon’s fees, brokerage) or as a percentage of the business value (architect’s fees). The professional’s earnings depends on the number of hours he puts in for providing services, the number of persons to whom he makes his services available. In other words, when he works, he earns. When he is off work, he doesn’t earn. If he has to increase his earnings he has either to increase his fee or work longer hours, and both these options have limitations.

Passive income is income that you receive even when you are not directly working for it. Rental income from property may be considered as passive income. A more common form of passive income is “residual” income from network marketing, where you receive some proportion of the income generated by your downline. Dividend income from stocks may be considered passive income.

The classic examples of passive incomes are royalty and copyright payments, income received by artists and writers for years after they have actually written that book or created that music album, or inventors long after they have made their invention.

Today there are hundreds of persons making a passive income from the internet, their websites on auto-pilot, making money for them 24 hours a day 7 days a week, even when they are asleep. You may check out “affiliate marketing” or “adsense” on the cloudpage at www.blogjordan.us to see how this works. You can also learn more about passive income from adsense at www.adsense-india.com.

You have reached the ultimate step in achieving financial freedom when your passive income alone is adequate to let you continue your lifestyle and you can therefore chose to work or not to work. In other words, you do not have to “work for a living”.

The goal of all financial planning is to achieve this kind of financial freedom as early as possible.

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