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Glossary

Passive Income - it's convenient

One of the benefits of an Internet business is passive income. The term is almost self explanatory, but it deserves a bit of attention just to make certain the key attributes and benefits are out on the table.

Before we define income that's passive, let's look at the idea of active income - the type of income most of us are used to. You know, going to work each day.

If we look at active income first, the benefits and convenience of income from passive sources will be much more clear.

If we're actively earning income, then we're making money based on something we're doing now. That means, if we stop doing it, we stop earning money because we're inactive. Going to a job each day is an example of active income. We wouldn't expect to get paid if we were "inactive" at work.

Let's say instead of going to work, we created our own business. We're making and selling sandwiches at a local sandwich shop each day. That's a good example of active income. You have to be there. You have to manage the inventory, deal with customers, make the sandwiches, supervise employees, make bank deposits, have change on hand, and open up and lock up your shop each day.

In addition to all the work each day, you previously laid the groundwork for your sandwich shop as well. There were things like establishing inventory, signing leases, getting a loan, recruiting employees, establishing the business entity, getting a food service license, arranging for health inspections and making certain you have all the tools, equipment and resources to make the business operate successfully.

So, with active income, you did a lot of prep work and you need to keep "cranking" along every day to keep the money coming in.

With passive revenue streams, it isn't so much what you're doing that earns you money, it's what you've built and what you've invested in setup. Passive income is based on what you've put in place to work for you, instead of you "staying on point" all the time.

If you make investments, that's passive income. You aren't doing anything actively to earn interest or dividends. If you've made the right investments, they'll earn a reasonable return on investment - all by themselves - without you having to do anything.

So, passive income is more about what you did, what you set up, and what you put into motion some time ago. It's largely an automated investment so you don't have to be actively involved each day. It does require monitoring and tweaking, but for the most part it just cruises along earning you money while freeing you up to do something else.

This is where an Internet business provides a tremendous opportunity. Most if not all of the income from a business on the web can be passive in nature. You set it up, you coax it along, but you don't have to be actively dealing with customers on a daily basis to produce income.

Here are four common examples of passive income from web-based enterprises:

  • advertising fees
  • affiliate sales commissions
  • referral fees
  • selling Ebooks

One of the advantages of this type of income is that you can create multiple revenue streams and they can be making you money simultaneously and independently without you doing much of anything other than the time and effort to put everything in place.

Another advantage is that you can be doing other things while these passive income sources make revenue for you. Other things could include setting up another Internet business, refining the ones you have, going to work in order to earn income in the traditional way, or simply taking time off.

The beauty of this is simply that periodically money is deposited into your bank account, usually once a month, while you're doing other things. It takes a little effort to monitor and manage web-based passive income, but it can easily be done on a part-time basis.





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