What is Passive Income?

There are two main types of income: passive or residual income and active income, and its practical difference is huge. Active income is defined as the money you get actively; this means, the money you get while working. It can be generated as an employee, self employed, or freelancer, or other ways but regardless of the way you get it, if you stop working you stop generating money. Passive income in the other hand is the money you receive without having to take action to acquire it; you don't have to work for it and you could be making money while sleeping.

Although the idea of generating passive income sounds great, nothing is free in this life, well except for the millionaire's kids. But if your daddy is not rich you will have to work and spend first to make passive income streams. The main question here is how much you are willing to spend in terms of money and time.

In real estate for instance, you will have to spend time looking for a good opportunity, then advertise your apartments, warehouse or whatever you invested in, in order to find a tenant. The good thing is that once you have things going, you don't need to invest much time or money afterwards, and cash will keep flowing.

One of the best aspects of passive income is the opportunity to divide your time more efficiently. It is impossible to have two or three full time jobs at the same time, but you can have endless passive income streams at any time. Once you get one going, then you can invest in something else, and when it is done, move on and find another opportunity.

You can experiment with several kinds of passive income. Depending on your preferences, you can choose to generate income from real estate, a new invention, stock market, the internet or whatever you have in mind. The possibilities here are endless and you only need your imagination to get started.

Before you start, it is a good idea to keep your job at the early stages. This will give you tranquility and you will be more likely to take risks. Separate a part of your active income, and make it your investment capital. You might lose money with some of your investment ideas, so learn everything you can about your future investment before jumping blindly into it.

Once you get a successful passive income stream, it is time to move to the next. This time you will have more investment capital, and you will be more confident because you already achieved a successful income source. Then rinse and repeat, this is how big fortunes are made.