I explained the difference between passive income and active income last week. Active income is one we are pretty familiar with, it is what 95% of the schools in the world today prepares you to earn. They prepare you to get a job or build a career with your professional skills (self-employed in other words). So i will go straight into passive income.
There are five major ways to generate passive income according to study. The idea is to create something, an idea, an invention, an innovation, a business that you can create a system around, such that whether you are there or not, it will still produce income for you.
All sources of passive income, need to be actively built at the beginning. So, just owning a job will not cut it. Nobody earns passive income working a job, you get passive income from these five sources below:
1. Real Estate – here the passive income is rent. Here you can build houses to rent out, hotels, golf courses, shopping malls, etc and earn rental income from them.
2. Automated Businesses – Forbes defines a big business as one with 500 employees. It’s simply a system you have created around a product, service or competitive advantage. Here, passive income is shares, profits, etc
3. Intellectual property – passive income here is Royalty. This is earned from writing a book, blogging, music, software, DVD, movies, etc. For example Fela has been dead for years but his music still earns royalty, movies made about him and plays acted on his life earns royalties for his family.
4. Shares, Dividends, stocks, bonds, fixed deposits – here passive income is dividends. Here it is said that for you to call yourself an investor playing in this field, you must have a minimum of N80m invested in this area.
5. Network Marketing – royalty here is bonuses, dividends and profits earned from having built a sales organisation over a period of 3 – 5 years.
These are the major areas. Noting them ensures that you start asking questions about them and ensuring that the future you are building, takes these into consideration.
