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I often bandy about the phrase passive income, but it’s come to my attention lately that there is some confusion about what that term actually means, and unsurprisingly so when we see it used in so many different scenarios.

So today let’s look at passive income vs nonpassive income and what this term means to me and how it can positively impact your life if approached in the right way.

What NonPassive Income Is

First, let’s consider what nonpassive income is. This is any income where you are trading time for money. So this could be your salaried job, where you get paid hourly, weekly or annual remuneration.

It could also be when you offer services to someone. So maybe you are a coach, aromatherapist or accountant and therefore if someone books an hour’s appointment with you, the payment is so many dollars (pounds, euros) per hour.

What Passive Income Is

Passive income on the other hand is leveraging your knowledge or your existing assets, such as a blog, to earn income around the clock. Basically someone can make a purchase at any time and you aren’t tied to your desk when they do.

You might want to think of it in terms of a pop group or an author. The person in question creates something wonderful that we all want and then they go on to sell it time after time, but the work was only put in during a concentrated period at the start.  With singers and authors it was traditionally referred to as royalties.

What Kind of Activities Fall Under the Banner ‘Passive Income’?

Many different things can be considered passive income, here are just a few of them:

  • Writing an ebook and selling it from your website.
  • Writing a Kindle book and selling it on Amazon.
  • Affiliate marketing.
  • Sponsored posts/advertising on your blog.
  • Creating digital courses that you sell from your own website or on places like Udemy.

This is just a drop in the ocean, but hopefully it has started you thinking. Usually passive income involves providing a solution for someone, entertaining them or sharing your expertise.

What Passive Income Is Not

I also want to address the elephant in the room and talk about the fact that passive income is often associated with tacky marketing tactics.

We have all seen the promises to make us an internet millionaire if we only buy this piece of software or take these three actions, and it’s often lumped under the umbrella of a way to create passive income.

Whilst passive income doesn’t involve trading time for money, it does very clearly involve WORK. First, you have to put in a concentrated period of work up front to create whatever it is you are going to be selling. Second, you usually have to then market this creation on an ongoing basis if you want to make passive income from it. Third, you then have to support that creation on an ongoing basis. If it’s a course or book you might have to update it, or support the people who purchased it if they have questions.

Don’t get me wrong, passive income has so many benefits ~ but it does require work. However, if you do the work, you can ultimately make income over a much longer period, and at a mucher higher value, than a normal hourly rate.

I hope that has helped to make this area less murky, but if you have any questions please don’t hesitate to leave a comment below.

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