What is passive income? Examples and why you need it to become rich!

Updated: Feb 27

What is Passive Income?

If you have never heard of passive income get ready to be amazed...

Passive income is the idea of earning money by not directly exchanging your time. When most people think about ways to earn money they immediately think of getting a job where they can trade their time for money (active income) and get paid usually an hourly wage (e.g. $15 an hour.)

Whereas passive income is any income that is not actively made. That being you did not trade your time directly for money. But instead you may have created or invested something initially and get paid for it ongoing. For an example writing a book and receiving royalties years after you wrote the book and performed the work.

Why would you look to make passive income?

Does the idea of making money why you sleep appeal to you? Waking up in the morning slightly richer than how you went to bed? This can all be possible thanks to the power of passive income. By putting in the effort initially or the investment you have created a source

of income that works regardless if you are! Whereas the majority of people are trading their time for money! Passive income separates the relationship between time and money.

Why passive income separates the rich from the poor!

What's one thing that every person on earth has in common? Time. Everyone has 24 hours in a day whether you like it or not. No matter who you are you cannot create time or get rid of it. Now the rich understand this concept and it is why passive income becomes their best friend.

Poor people tend to have the mindset that in order to make more money they have to work harder and longer! And although this will get them more money it will not make them eternally rich. Why? Well because they only have 24 hours in a day and they sure can't work for all of them. This is where passive income is appealing to the rich because not only do they not have to directly trade their time for money but the amount that they can make is scaleable! There is no limit to the amount they can make!

Yet another appealing factor about passive income is that you can have multiple streams of income. This is another key factor of becoming rich (creating multiple streams of income!) Whereas if you seek active income, due to the limiting 24 hours in a day you will only have one or two streams of income.

Examples of Passive Income:

Now there are so many sources of passive income you can obtain and the best thing is it gets bigger every year. When it comes too investing for passive income there are two common sources being rental income (real estate) and stocks (dividends).

Rental Income

Now it is debatable whether rental income off real estate is a passive income source due to the level of involvement. This being that passive income is thought to be little to no maintenance or ongoing work after the initial work has been done. The thing is with real estate and rental income is that there is ongoing work, as you have essentially become a landlord. And the job of being a landlord is to manage the property, that being collecting rent, sorting out complaints and fixing any property faults. Now the level of ongoing work all depends on the type of property and the difficulty of the tenants. However by hiring a property manager or letting the real estate agency deal with the ongoing work it can all become passive income as you outsource all of the work and only see the profits (assuming there is some!)

But back to the passive income link. Rental income as a whole is passive as you are owning the property (initial work or effort) then someone is paying you to live in your property (earning money while you sleep!)


Stocks is the other huge example of passive income and can be as passive as it gets! Basically as mentioned in my stocks and dividend post, certain stocks and shares you

own can pay out cash dividends. For simply owning a percentage of a business you are rewarded with cash! And the best part is you didn't have to do anything. Now the amount that you get paid out (passive income) all depends on what business you have invested in and the amount or percentage you own. Stocks is a great way to earn some passive income however the stability and volatility can make this a more riskier investment.


Now these two examples are considered to be the most popular common ways people make passive income through investing. However these just graze the surface of passive income ideas. Passive income can also be made through creating! Here are some more ideas:

  • Creating a Youtube channel (receiving money through ads)

  • Creating a blog (receiving money through promotions and affiliate links)

  • Sell an e-book (receive money through royalties)

  • Create an app or website (receive money through ads)

  • Affiliate Marketing (receive money by directing traffic to your affiliate links)

  • Display ads or promotions on social media platforms (receive money from companies paying you to promote them)

The ways you make money through these ideas are not just limited to the ways I have listed. There are many ways you can monetise what you have created you just have to find out what works best!

These are just a handful of the many passive income ideas out there! But don't get confused that these income streams will be easy to create. Some, if not all of the ideas take a large chunk of your time and hard work upfront. And there will be times where you are putting in all these hours and receiving nothing in return! The key is to stick with it and persist to receive the results.


Disclaimer: Young Money Investing is not a legal financial adviser. It is advised you seek legal advice before actually investing your money. Young Money Investing aims to help inspire, inform and reach your financial goals.

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Young Money Investing is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this website.