Why You Should Prefer Passive Income to Active Income
Passive income is attractive because it frees you to spend your time on the things you actually enjoy.
A highly successful doctor, lawyer, or publicist, for instance, cannot “inventory” their profits in the words of one well known author.
If they want to earn the same amount of money and enjoy the same lifestyle next year (the year after that), they must continue to work the same number of hours at the same pay rate.
Although such a career can provide a fantastic life, it requires far too much sacrifice unless you truly enjoy the daily grind of your chosen profession.
Even worse, once you desire to retire, or find yourself unable to work any longer, your income will cease to exist unless you have some form of passive income. Retirement can be a comforting but challenging event in many people's lives.
You want to be able to live comfortably during this time without worrying about how to make ends meet. To do this requires that you have a solid strategy in place that can provide consistent income, protect you against inflation and allow you to live a comfortable lifestyle during your retirement years.
In the past, this was accomplished by employee participation in company-sponsored pension plans.
The Two Broad Types of Passive Income
There are two types of passive income and throughout your career, which ones you focus on will likely depend upon your current financial situation, talents, skills, and personality.
The two categories of passive income are:
1. Passive income sources that require capital to start, maintain and grow
2. Passive income sources that do not require capital to start, maintain, and grow
Those who choose to focus on the first category of passive income will need either family money, funds from investors, or the nerve to borrow large sums by taking on debt to fund the purchase of assets.
The second category of passive income are far better choices for those who want to start out on their own and build a fortune from nothing. They include assets you can create, such as a book, song, patent, trademark, Internet site, recurring commissions, or businesses that earn nearly infinite returns on equity.