How important is passive income?

Passive income is as important as drinking 8 glasses of water everyday. Some people see it as a necessity, while others think otherwise.

Case 1
James, 34, is a pilot garnering a income of $7,000 a month. He is able to afford an expensive car, a luxury house with big gardens and anything else that he likes. His monthly expenses, which includes the installments, credit cards, utilities, etc, turns out to be $5500. That leaves $1500 to save every month.

Not a bad lifestyle.

James was retrenched a year later, due to the global economic crisis. Other airline companies are offering him only $4500.
So what happened to his expenses? They remain. James was unable to accept his new lifestyle.
James wanted to ask for a higher pay, but there are many other pilots who are willing to work for less clinched the job.

Now James is jobless.
Income: $0
Expenses: $5500


Case 2
Connie is a school teacher. She has an income of $2500 and a monthly expense of $1000. Connie saved up $1500 every month and invest it into any business opportunities.

Every year, her passive income increases.

At the 2nd year of investing, her passive income was $900. However, she saved up that $900 every month and re-invest in for more passive income.

Finally after 5 years, her passive income became $3200. Right now, Connie have many choices.
1) Re-invest for bigger passive income
2) Quit her job, maintain her current lifestyle
3) Continue what she is doing right now, getting BOTH passive income and work salary


Importance of passive income
Passive income gives us the TIME and FREEDOM to do the things we like. Ask ourselves, do we enjoy our work right now? If yes, for how long can we work? If no, then why are we doing the same routine everyday?

Do you want to receive passive income after retirement or zero income after?

http://www.aboutpassiveincome.com/

What is passive income?

Passive income
We have probably heard of passive or residual income, but do we really know what is it?

Passive income is an income which we collect with little or no effort at all. .. .. Sounds like money falling from the sky? Not quite.

Some classic examples of passive income are:
Rental (Income from renting out a property)
Royalties (From writing books, CD albums, movies etc)
Businesses (Being a sleeping partner or shareholder)
Dividends (Stocks, shares, bonds and any other paper assets)
Internet Marketing (Most people call it the web 2.0)
And many many more...

I have a friend that did nothing but writing hip-hop music. For every music that he wrote, he earns a minimal sum of money every time someone buys it. His publisher was probably earning loads of money from him, but he didn't care because he doesn't want to be involve in all the publishing hassle.
After 5 years, he had written over thousands of music and his publisher is paying him close to ten grands every month. Just today, he gave me a call that he is going to retire and travel all around the world. I was like.. HE IS ONLY 31 YEARS OLD. RETIRE?!
That's passive income.

So which is the best type of passive income?
Well, there isn't really any "best" passive income. Many people have misconceptions that passive income is equivalent to "quick buck", scam, big money etc.

The "best" type of passive income is to have SUSTAINABILITY and MODERATION.

Why?

Imagine spending $100,000 on a business that gives $2000 every month, but the business fails in the first year. It sucks because the business lacks sustainability.


Identifying good passive income opportunities
Opportunities are everywhere, some good and some bad. Always evaluate how long will the income lasts versus the amount of income in return.

A good deal is when you know this income is trustworthy and you will get back your initial investment in less than 4 years (an average gauge).