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What exactly is Passive Income?

Updated on July 16, 2013

What EXACTLY is Passive Income?

According to, “Passive Income” is defined as:
Earnings from rent, limited partnership, or other sources of income (in which the earner does not take an active part), not including salary, wage, interest, or capital gain. Also called unearned income, passive income can be written off against passive losses

99% of online content that includes the words “passive income” all include some sort of online sales page/offer from an “internet guru” (or for some, “lifestyle design experts”) , often selling informational products that make bold claims of making thousands online while doing next to nothing. You’ve seen them. I’ve seen them. Whether they are credible systems that can be reverse-engineered or duplicated is another story.

But for many passive income apprentices such as myself out there, the most important question we need to define in order for us to construct the system we need to succeed is:

What Exactly Is Passive Income For ME? How would I define “Passive Income”?

The reason I emphasize the words “ME” and “I” is simply because for us to truly find success in the passive income industry, we need to create a definition of what suits US as INDIVIDUALS. Passive Income is an area of business where no specific template guarantees success in both offline and online endeavors.

For me, I define "Passive Income" as:

Any income that I make from 1 initial heavy investment of time and resources, that required minimal maintenance and does not take away from my ability to enjoy life with my family.

To be able to create our own definition of "passive income", we need to invest TIME, and not MONEY. We need to invest in first opening our mind to the possibility of passive income, not the ability to create it (yet). If you want a cut-and-paste definition and system of generating passive income, there is a smorgasbord of products, from seminars to lessons to ebooks that can offer you the knowledge you need FOR FREE. I personally believe that you can easily educate yourself without spending the money some Internet gurus claim you should be spending on their product. Case in point: John Chow.

Simply put, we need to research and educate ourselves as to the many ways passive income can be generated, and more importantly, HOW it will be generated. Are you extremely hands-on, with great energy and an over-eagerness (and ability) to share your expertise with the world, like Pat Flynn and Smart Passive Income Blog, that generates an amazing amount of FREE information on an almost consistently weekly basis? Are you more laid back and would much rather work on a venture once and rarely touch it again, like a niche site or a static sales page? Do you like high risk,high reward (dividend paying individual stocks) ? Or would you rather stay safe with moderate returns (diversified mutual funds, GIC’s)? Would you like your passive income businesses tangible (like rental properties), or intangible (websites, stock)? Do you want to remain within a specific industry (real estate, finance, information) or diversify (real estate property portfolio and online niche websites specializing on house renovations and contractor FAQ’s as an example.)

There is a massive world of options available for the passive income apprentice. All it takes is patience and research to educate one’s self in creating an individual passive income plan tailored to one's self, that one can eventually execute. So here’s my advice: Take the’s definition as a starting point, and brainstorm from there. Just like cooking–to create a truly unique masterpiece that can give a chef fame and fortune, he has to start from the basics and create something that he can eventually call his own.

So crack those books open, skim those websites, put up an effective pop-up blocker, pick up that real estate newspaper, and install that stocks analysis app TODAY! The sooner you create your own personal definition of what “Passive Income” means to you, the faster you can get to drafting your plan for success!

Passive Income: Are You Interested Or Not?

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    • TheYoungDad profile image

      Retired Pharmacy Tech 4 years ago from Canada

      Love the part "Who's to say who the best one is?"Imagine all the s0-called "masters duking it out in a ring, seeing one can sound smarter than the other (big industry jargon like's Corbett Barr), or using catchy titles but unclear directions (like Chris Guillebeau and The $100 Startup) or even better, just spew out advertising masked as relevant content (, enough said.) We need more Pat Flynn's and Roses and Dollars in the world of passive income--transparent, trustworthy people.

      It does take time and I must admit Hubpages has proven a dark horse for me, generating more daily income for me compared to AdSense. Then again I've only been doing this for 2 months so we'll see.

      Thanks for the great comment btw :D

    • Marsha Musselman1 profile image

      Marsha Musselman 4 years ago from Michigan, USA

      I think it's okay to have to invest time and money initially to begin whatever type of business a person wants to pursue that will provide the passive income they desire. I agree that it's wise to consider and not invest that money in the self-made guru's around. For one thing, who's to say who the best one is?

      There are a lot of places that do provide help for free and a few sites that provide help and seminars for a minimal fee.

      The main thing is that folks need to realize it all takes time. Just like investing in stocks, bonds and mutual funds, there may be some immediate rewards, but it's the long term rewards we're mostly concerned about.

      Btw, I liked your comparison between those investments and that of building a passive income business.